awareness about financial - icici directcontent.icicidirect.com/moneymanagermagazine/february... ·...

Shilpa KumarMD & CEO

ICICI Securities Ltd.

Awareness about financial

planning has risen over the

years, but an important aspect

of financial planning overlooked

by us is that of 'estate planning'.

This systematic approach to

transfer and secure one's wealth

through the use of trust or will,

both during the course of life

and post demise is not very

c o m m o n a m o n g I n d i a n s

pr imar i ly because of two

reasons : either 'it's too early to

draft a will' or 'the portfolio is not

big enough'.

It's time we dispel this myth. An

estate plan is for everyone who

wishes to execute a smooth

transfer of their assets due to his/ her incapacitation, irrespective

of their current age or size of their portfolio.

Estate planning doesn't merely mean will drafting. It is an

extensive process that deals not only with legacy wishes or asset

distribution, but also can help your family to attain financial goals.

A will is a simple legal document that contains wishes of a person

regarding transfer of assets or even responsibilities. Contrary to

our normal perception, writing a will is very simple and does not

require much effort. A hand written will, witnessed by two is

legally valid. It is however advisable to get the provisions of the

will checked by an expert or a lawyer to ensure that there are no

ambiguous statements or conditions.

In the absence of a will, your estate is distributed according to

Indian succession law. However, the succession laws do not

consider specific needs of individual family, consequently

distribution of property may not be executed as per your wish.

Without a will, wealth of the deceased person is distributed

among his legal heirs in accordance with the laws of inheritance

applicable to him. It could be the Hindu Succession Act, the

Islamic inheritance law or Indian Succession Act.

A well-drafted will minimizes the time taken for transfer of assets,

which otherwise is a lengthy process. If the wealth creator is the

sole bread winner, his family may have to face financial crisis in

case of unforeseen delays in the transfer. A will reduces the

efforts to mobilize acquisition of assets by the heirs. A benefit for

the creator is that, he gets a better understanding of his finances

while listing down all his assets and investments in order to make

a will.

Apart from distribution of property, a will can also help entrust

responsibilities such as responsibility of a minor child in absence

of your spouse, guardianship of children until they come of

rightful age.

Lastly, I would like to clear up a common misconception among

investors that providing nomination facility is an alternative

estate planning strategy. While assigning nominee facilitates

transfer of assets to beneficiaries without producing succession

certificate, a nominee is only caretaker of the asset and not the

owner. The will is the most efficient tool to ensure your legacy is

passed on to the intended recipients.

The best of plans are meaningless without proper execution and

it is our endeavor to guide you at every turn of your life. I am sure

this edition of ICICIdirect Money Manager will help you realize the

importance of estate planning. Through our website

www.icicidirect.com and this magazine we want to make an

earnest attempt to partner with you in setting and achieving your

financial goals. Do walk into any of your Neighbourhood

Financial Superstore and talk to us.

ICICIdirect Money Manager February 20181

We spend the better part of our lives building assets, thus it is equally important to take steps towards protecting them. The most effective way to do so is through estate planning. The basic idea of estate planning is to transfer your wealth according to your wishes through wills or trusts. It's a mechanism by which your estate is distributed among people you choose and in a manner you find fair. The practice also reduces family disputes and ensures hassle-free legal process.

So why doesn't a person draw up a will to make sure that the assets are passed on to the rightful person in an orderly manner? One answer could be the fact that there is a lack of awareness about eligibility and also what goes behind the process of estate planning. We hope to put light on some of these questions through our magazine.

There is no specific age to create an estate plan. Anyone who has some asset holding in his/her name should create one. The use of wills and trusts in the right manner enables you in building an estate plan. In this issue of ICICIdirect Money Manager we highlight the process of estate planning and explain the criticality of creating a Will and other mechanisms like trusts to help you create an estate plan.

This month being the Budget month, we also feature a section 'Budget Review' stating key measures announced in Union Budget 18-19 and its impact on economy and various market sectors.

We also offer comprehensive information and analysis on equity diversified funds, the ever-green option for individuals to invest for their long-term financial goals. So read on, stay updated and involved. Do write in with your feedback at moneymanager@ icicisecurities.com and share your thoughts.

Your magazine is now also available on www.magzter.com, a digital newsstand.


Editor & Publisher : Abhishake Mathur, CFA

Editorial Board : Sameer Chavan, CWM®, Pankaj Pandey

CMEditorial Team : Nithyakumar VP CFP , Sachin Jain, Research Team

Coordinating Editor : Namrata Lonkar

2


MD Desk.........................................................................................1

Editorial...........................................................................................2

Contents..........................................................................................3

News..............................................................................................4

Stock ideas: Arvind Ltd. & TCI Express..........................................5

Flavour of the MonthEstate planning is a less common practice in India. Moreover, there is wrong notion attached to it: estate planning or writing a will is only for the old. We differ from this traditional thought. Read our cover story where we have looked at the various aspects of this concept to help you understand estate planning better...........................................................................................14

Budget review Find out exclusive highlights from Union budget 2018-19and what announcements will have significant impact on your investments, personal finance and overall financial status......24

Ask Our PlannerYour personal finance queries answered by our expert planner.........................................................................................34

Mutual Fund Analysis It's time to remain constructive in balanced funds and maintain stability in the portfolio. Check these top three funds recommended by our research team........................................37

This month on iCommunityTake a look at the latest activities on our unique information platform- iCommunity (for February 2018)................................47

Equity Model Portfolio.................................................................... 48

Quiz Time.......................................................................................52

Prime Numbers.............................................................................. 53

3

The first to experience the future of wireless technology, well before most humans, will be South Korea's wild boars. That's because 5G, the fifth-generation wireless network, is making its worldwide debut at the Winter Olympics in Pyeongchang.

The technology will be used to ward off the porcine pests who roam the mountainous region around the Games with fast-acting systems that shoot rays, spew gases and emit tiger roars. About 1 billion people worldwide are likely to be 5G-enabled within five years.

Courtesy: Livemint

5G is here: super speed makes worldwide debut at Winter Olympics

Retail inflation eases slightly in January

Retail inflation slightly eased in January from a 17-month high in December but

remained above the 4 per cent medium term target of the Reserve Bank of India (RBI)

for the third straight month. Consumer food prices rose 4.70 per cent in January,

compared with 4.96 per cent in December, as prices of pulses fell 20.19 per cent from

a year earlier. Food prices have softened, reflecting eased vegetable costs following

stepped-up arrivals in markets of fresh crops.

The central bank expects retail inflation to pick up to 5.1-5.6 percent in April-

September before easing, assuming normal rainfall.

Courtesy: The Hindu


Providing a tax efficient option for its customers, SBI Mutual Fund on Thursday announced the introduction of 'Bandhan SWP (Systematic Withdrawal Plan)' which offers monthly cash flow from an individual's mutual fund investments to their immediate family member.

The facility would be offered to both new and existing SBI Mutual Fund investors who can opt for it to provide a monthly sum of money from their investment in a growth option of an open-ended mutual fund scheme to either a parent, sibling, spouse or child.The minimum withdrawal amount is Rs 5,000 per month for a period of 12 months.

Courtesy: Business Standard

SBI Mutual Fund introduces tax-friendly systematic withdrawal plan

CBT to meet on February 21, decide on rates for 2017-18

The Central Board of Trustees of Employees' Provident Fund Organization (EPFO) will meet on February 21 to finalize the interest rate for 2017-18, officials said.

The retirement fund body has already monetized its investments in exchange traded funds, which will have a bearing upon the fixation of interest rate for this fiscal. Officials said the EPFO has already sold about 2,886 ETF units and earned Rs 1,054 crore from offloading the ETF investment earlier this month, they said. The EPFO had announced 8.65 per cent rate of interest on deposits for 2016-17, a tad lower than 8.8 per cent in 2015-16.The agenda listed for the meeting of the trustees includes the proposal for rate of interest on the EPF deposits for the current fiscal.

Courtesy: Indian Express

4

STOCK IDEAS


Arvind Ltd - Sustained profitability in B&R segment…

Company Background

Arv ind L td i s the f l agsh ip

company of the Lalbhai Group

that has been round since 1930.

Arvind started as a superfine

fabric manufacturer in the early

30s. Since then, the company has

been constantly reinventing itself

by venturing into new categories

in textiles like denim, suiting,

shirting, etc. Arvind has been a

pioneer in India in launching

domestic denim brands like Ruff &

Tuff and Flying Machine. The

company has also been licensing

international brands like Arrow

and US Polo in India. Currently,

Arvind is considered India's

leading fully integrated textile,

branded apparel & retail company,

which has a strong presence

across the value chain. The

company is a market leader in

manufacturing denim in India with

total capacity of 108 million metre

per annum (mmpa) of which 44%

is export driven. The textile

d i v i s i o n c o m p r i s e s s u b -

categories like denim, woven,

voiles and knits. The company

also has garmenting capabilities

with an annual capacity of ~22

million pieces.

Investment Rationale

Momentum for B&R segment slows

down but profitability improves

Revenues from the brand & retail

(B&R) segment grew 24% YoY to `

957.6 crore in Q3FY18 mainly due

to inclusion of Tommy Hilfiger &

Calvin Klein in the consolidated

numbers due to Ind-As. Excluding

the same, the revenue growth for

the base portfolio was at 9.5% YoY

(GST adjusted growth 15%) to `

8 3 7 c r o r e . ' Po w e r b r a n d s '

continued to report decent like-to-

like sales (LTL) sales growth of

7.9%, 'Unlimited' registered

negative LTL sales growth of 27%

mainly on account of a very high

b a s e e f f e c t o f l a s t y e a r.

Profitability for the B&R segment

improved signif icantly with

EBITDA more than doubling from

` ` 30 crore in Q3FY17 to 67 crore

in Q3FY18. EBITDA margins for

the quarter improved 350 bps YoY

to 7% while excluding (TH & CK)

margins came in at 8.2% vs. 4.4%

in Q3FY17. The management

highlighted that most emerging

brands are expected to breakeven

by Q4FY18 and turn positive by

FY19.

5


STOCK IDEAS

` 1500 capex to drive next leg of

growth for textile division

Constant rupee appreciation and

a reduction in duty drawbacks

c o n t i n u e d t o h a m p e r t h e

per formance of the text i le

division. Revenues for the textile

division grew 9% YoY to 1540 `

crore . Growth was ma in ly

accelerated by 16% growth in the

garmenting segment to 319 `

crore. Arvind has commenced its

operations for the Phase I I

garmenting expansion in Ethiopia

and expects to reach high single

digit margin in FY19. Volume for

denims came in at 25 million

pieces (up 14%) while realisations

declined sharply by 7% YoY to `

181/piece. EBITDA margins for

the textile division declined

significantly by 330 bps YoY to

14%. Arvind has charted out a `

1500 capex outlay mainly towards

garmenting and technical textile

division that will drive the next leg

of growth, going forward.

Macroeconomic challenges impact

textiles performance

Constant rupee appreciation and

a reduction in duty drawbacks

c o n t i n u e d t o h a m p e r t h e

per formance of the text i le

division. Revenues for the textile

division grew 9% YoY to 1540 `crore . Growth was ma in ly

accelerated by 16% growth in the

garmenting segment to 319 `crore. Arvind has commenced its

operations for the Phase I I

garmenting expansion in Ethiopia

and expects to reach high single

digit margin in FY19. Volume for

denims came in at 25 million

pieces (up 14%) while realisations

declined sharply by 7% YoY to `181/piece. EBITDA margins for the

t e x t i l e d i v i s i o n d e c l i n e d

significantly by 330 bps YoY to

14%. Arvind has charted out a `1500 capex outlay mainly towards

garmenting and technical textile

division that will drive the next leg

of growth, going forward.

Fundamentals remain intact; maintain

BUY!

With de-merger on the cards, we

believe Arvind would be able to

efficiently channelize its resources

to full potential leading optimized

results in the long term. Going

forward, we expect Arvind to

clock sales, PAT CAGR of 13.2%,

24.2%, respectively, in FY17-19E.

We v a l u e t e x t i l e s a t 6 . 5 x

EV/EBITDA and B&R at 2.0x

MCap/sales. We maintain BUY

rating on the stock with a target

price of 480.`

6


STOCK IDEAS

Stock Data

Key Financials

Valuations Summary

7

Key risks include:

Volatility in cotton prices

Cotton prices have been volatile over the

past few years. The textile business of the

company is exposed to the risks of this

volatility. Any increase in cotton prices

would impact standalone prices and result

in lower EBITDA.

Increase in royalty payments

Currently, the company operates in a combination of arrangements with international brands. This includes setting up of subsidiary/JV, franchisee or licensing. The current royalty payment is 2.87% of net sales. Any increase in royalty

payments or any hike in taxation on royalty payment would impact EBITDA margins for Arvind Brands & Retail (ARBL).

Failure of new brands/investment overshadows core performance

The company currently has 31 brands in its portfolio. If there is sluggishness in the uptake of apparels, new brands / investments of the company would drag d o w n t h e o v e r a l l c o n s o l i d a t e d performance. Furthermore, till new brands stabilize they would keep denting the company's profitability for an extended period. This would also result in new brands not choosing Arvind and preferring other companies for their strategic partnership

` Crore FY16 FY17 FY18E FY19E

Net Sales 8,011 9,236 10,508 11,829

EBITDA 951 943 1014 1203

Net Profit 316 320 349 494

EPS (`) 12.3 12.4 13.5 19.1

FY16 FY17 FY18E FY19E

P/E 31.3 30.9 28.3 20.0

Target P/E 28.5 28.2 25.9 18.3

EV / EBITDA 14.4 13.6 12.5 10.5

P/BV 3.7 2.8 2.6 2.4

RoNW 11.9 9.0 9.3 11.8

RoCE 11.0 9.9 10.5 12.3

Market Capitalization (` crore) 9895.2

Debt (` crore) 2965.5

Cash and Cash Equivalent (` crore) 53.9

EV (` crore) 12806.9

52 Week High / Low (`) 478 / 353

Equity Capital 258.4

Face Value (`) 10.0


STOCK IDEAS

ANALYST CERTIFICATIONWe /I, Bharat Chhoda, MBA, Ankit Panchmatia, MBA and Cheragh Sidhwa, MBA Research Analysts, authors and the names subscribed to

this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or

securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s)

or view(s) in this report.

Terms & conditions and other disclosures:ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock

brokering and distribution of financial products. ICICI Securities Limited is a Sebi registered Research Analyst with Sebi Registration

Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India's largest private sector bank and has its

various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund

management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in

India. We and our associates might have investment banking and other business relationship with a significant percentage of companies

covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their

relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report

and 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. While we would endeavour to update the information herein on a reasonable basis, ICICI Securitiesis under no

obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI

Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such

suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be

acting in an advisory capacity to this company, or in certain other circumstances.

This report is 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. This report and information herein is solely for informational purpose and shall

not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

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Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal,

accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The

securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment

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The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI

Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not

necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before

investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are

not predictions and may be subject to change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have

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ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period

preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate

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ICICI Securities or its associates might have received any compensation for products or services other than investment banking or

merchant banking or brokerage services from the companies mentioned in the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report.

ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the

report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and

their relatives have any material conflict of interest at the time of publication of this report.

It is confirmed that Bharat Chhoda, MBA, Ankit Panchmatia, MBA and Cheragh Sidhwa, MBA Research Analysts of this report have not

received any compensation from the companies mentioned in the report in the preceding twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service

transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the

Company mentioned in the report as of the last day of the month preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial

ownership in various companies including the subject company/companies mentioned in this report.

It is confirmed that Bharat Chhoda, MBA, Ankit Panchmatia, MBA and Cheragh Sidhwa, MBA Research Analysts do not serve as an officer,

director or employee of the companies mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in

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Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

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described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this

document may come are required to inform themselves of and to observe such restriction.

8


STOCK IDEAS

TCI Express – Speed, agility, delivery!!!

Company BackgroundT C I E x p r e s s ( T C I E L ) , headquartered in Gurugram, was established in 1996 as one of the foremost divisions of Transport Corporation of India ( TC I ) . H a v i n g a c h i e v e d financial and growth stability, TCI de-merged this division in 2017. Given the exclusivity of the business, TCI issued one equity share (FV | 2) to existing shareholders for every two equity shares (FV | 2). Post demerger, TCI Express ceased to remain a division of TCI and was separately listed on the bourses. The wide spectrum of services offered by TCIEL include surface express, domestic and international air express, e -com express, priority express and reverse express. These logist ical solutions are spread across industry segments such as automobi le spare par ts , pharmaceuticals, retail, e-commerce, te lecom and SMEs. The offerings mainly address B2B customers (95% of revenue). It involves door-to-door pick-up and delivery of parcels (5-40 kg) in a time

bound manner predominantly via surface transport. TCIEL claims to have one of the largest reaches domestically. It serves 670 districts (out of 675) through a flotilla of 4000 c o n t a i n e r i s e d t r u c k s . A network of 28 sorting centres, 550 company branches, 400 express routes and 2500 feeder routes, TCIEL serves 40,000 pickup and delivery points.

Investment Rationale

Demarcation to bring focused approach; high growth phase for TCIEL…Post de-merger, FY17-18 was the first operating year wherein TCIEL operated as a separate independent entity declaring separate business goals and t a r g e t s . D u e t o u n d e r -investments and different business verticals, TCIEL under the consolidated entity grew at a sluggish pace of mere 9% in FY10-16 compared to the industry, which grew >10% o v e r t h e s a m e p e r i o d . However the revenue growth

9


STOCK IDEAS

10

rates for 9MFY18 for TCIEL (post de-merger) remained robust at 16% YoY to | 635.7 crore compared to | 547.8 crore in 9MFY17. For the same period, TCIEL outperformed its industry peers BlueDart, Gati and VRL Logistics for which revenue growth rates were in the range of 5-10%.

Trinity of revenue growth, margin expansion & structural changesThe under-investments and s l u g g i s h b u s i n e s s environment led TCIEL to grow at 6% CAGR in FY13-16. However, FY16-17 marked the first year for TCIEL as an independent entity that led to dedicated investment of | 95.3 crore in FY15-17. TCIEL has now earmarked a capex of ~| 400 crore over five years (FY18-22). The core to these i n v e s t m e n t s w o u l d b e expand ing i t s pan- Ind ia presence (locations served), improving parcel turnaround time (handling equipments) and increas ing handl ing capacity (sorting centres). The focused capex has initiated a new growth phase for the company with FY17 revenue growth of 14% positioning

TCIEL at an inflection point. Revenues are expected to grow at 16% CAGR to | 1184 crore in FY17-20E.

GST, e-way bill - Structural impetus to organised segment…With the abolition of multiple taxes, the GST regime has led most businesses to redesign their supply chain network leading to cost efficiencies compared to the erstwhile network, which was based on state-wise tax benefits. The commencement of e-way bill would ensure that goods being transported comply with the GST law, which includes invoicing, disclosure, tax payment, etc. Moreover, it would also facilitate real time tracking of goods movement. Unorganised players would rema in wary o f r andom checking by “mobile squads”, which continues under the GST system. The surveillance under e -way mechanism m a k e s i t d i f f i c u l t f o r unorganised player to operate. Capitulation of unorganised players coupled with faster turnaround time would benefit organised player like TCIEL.


STOCK IDEAS

11

Valuations Summary

Key Financials

` Crore FY17 FY18E FY19E FY20E

Net Sales 755.2 857.1 1012.9 1183.8

EBITDA 67.6 83.3 112.0 139.8

Net Profit 40.7 53.5 66.8 83.6

EPS (`) 10.6 14.0 17.4 21.9

FY17 FY18E FY19E FY20E

P/E 47.0 35.8 28.7 22.9

Target P/E 62.0 47.3 37.8 30.2

EV/EBITDA 28.6 23.4 17.3 13.8

P/BV 12.0 9.5 7.1 5.4

RoNW (%) 28.8 29.6 28.4 27.0

RoCE (%) 35.1 34.9 36.9 36.7

Stock Data

Market Capitalization 1915.0

Total Debt (FY17) 31.6

Cash (FY17) 9.5

EV 1937.1

52 week H/L (`) 645 / 284

Equity capital 7.7

Face value (`) 2.0

FII Holding (%) 3.2

DII Holding (%) 10.2


STOCK IDEAS

Key risks include:

Risks to capac i ty u t i l i sa t ion

assumptions…

TCIEL currently operates at an

average utilisation level of 85%.

Utilisation levels in H1 are

usually low at 82%. However, H2

remains strong with utilisation

scaling up to 88%. The current

capacity of 765000 tonnes is

expected to reach 1 million

tonnes by FY20E. Moreover,

these capacities are static

(company owned) for which due

to f ixed overheads (OHs)

util isation remains crucial.

Under-utilisation would be a

d o u b l e w h a m m y f o r o u r

estimates as a decline in topline

would be accompanied by

margin compression resulting in

a s t e e p e r d e c l i n e i n o u r

profitability and EPS estimated,

adversely impacting our target

price.

W e a k e n i n g o f c o m p e t i t i v e

positioning…

Delhivery, Ecom Express and

Rivigo received the maximum

funding for FY17 in the logistics

PE space. The funding spree of

Rivigo backed by marquee

investors like Warburg Pincus

and SAIF Partners has made the

company the fastest start-up to

achieve Unicorn status (startup

company valued at over $1

billion). Following the success

story, the logistics sector which

was plagued by poor manpower

skills, inefficient fleet utilisation

and fragmented infrastructure

remains an opportunity for a

startup. Age-old traditions and

business methodology are

r e p l a c e d b y n e w a g e

technologies to achieve global

standards.

12


STOCK IDEAS

ANALYST CERTIFICATIONWe /I, Bharat Chhoda, MBA and Ankit Panchmatia, MBA Research Analysts, authors and the names subscribed to this report, hereby certify

that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify

that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

Terms & conditions and other disclosures:ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock

brokering and distribution of financial products. ICICI Securities Limited is a Sebi registered Research Analyst with Sebi Registration

Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India's largest private sector bank and has its

various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund

management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in

India. We and our associates might have investment banking and other business relationship with a significant percentage of companies

covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their

relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report

and 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. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities wis

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13

FLAVOUR OF THE MONTH

Leave a legacy through comprehensive estate planning


Our personal finance consists of two important factors – building an asset and

protecting that asset. While we put great efforts and time to buildanasset why do

we sideline the latter? Deciding rightful successor of your assets and

responsibilitiesbeforehandisthe most essential way to protect your

estate.Unfortunately, estate planning is a less common practice in India. One of

the reasons is - lack of awareness. So, here we bring to you the criticality of the

concept.What is estate? How to draft a will? Who should make it? We try to

answer all of your questions in the following article…

14

What is an estate?

Your net worth,comprising

everything you own as well as

th ings that you owe is

collectively considered as

your estate. In layman's

words – individual's bank

accounts, properties, car or

any other asset and also

mortgage or other form of

debt tagged along with these

assets can be categorized as

one's estate.

Why we need estate planning?

You may have seen or heard

of stories of families being

affected by legal hurdles after

the patriarch passes away.

These problems occur when

there is no proper inheritance

and succession plan in place.

A very important aspect of

planning your life goals is to

plan for the future and for

your heirs. This is where

estate planning comes in.

Estate planning is the process

o f a r r a n g i n g f o r t h e

distribution of your asset

holdings to your heirs by

anticipating and avoiding

different scenarios that can

create a conflict among them.

It attempts to el iminate

uncertainties associated with

planning for one's estate in

t h e e v e n t t h a t

h e / s h e b e c o m e s

incapacitated andfor when

h e / s h e i s

deceased.Guardians are

often designatedfor minor

children andincapacitate

beneficiaries. Estateplanning

helps preservethe value of

your estate for thebenefit of

y o u r h e i r s b y



implementingproven estate

and inheritanceplanning

strategiesto minimize estate

sett lementexpenses and

taxes.

Estate planning, as the name

suggests, is all about creating

a p lan for your assets ,

including all your holdings in

equity, debt, commodities,

real estate, gold, and

alternate investments like

art, gemstones, etc. If you

intend to keep your estate

assets intact for the sole

benefit of your heirs, you

have to know how to protect

these assets.

The most common

misperception among people

about estate planning is that

they don't think they have an

estate in the first place. For

many, the word “estate” is

associated only with big real

estate properties and trust

funds, but the reality is that all

a s s e t s a n d l i a b i l i t i e s

belonging to an individual at

the time of death constitutes

to an estate. In the absence of

proper succession planning

the court will decide who gets

what based on the intestacy

laws, which are triggered

when you die without a will.

If you have minor children,

part of your estate plan will

include designating who you

wou ld l i ke to se rve as

guardian for them should

they be orphaned? If there is

n o w i l l c o n t a i n i n g a

guardianship designation,

then the court will need to

make the designation based

on what he or she decides is

in the best interests of your

child.

Of late, philanthropy is

generating an interest among

many. People donate a

portion of their wealth to

charity. If, in case, you have a

desire to give back to society

after providing for your heirs,

estate planning provides you

the tools and options to do so.

Also, it must be noted that

there is no predefined age for

starting to create an estate

plan. Anyone who has some

asset holding in his/her name

and is above the age of 18

should create one.



Tools of estate planning:

Estate planning tools

During the life time of

an individual

Trust

Joint ownership

Gift

Power of attorney

Mutation

After the death of an

individual

Nomination

Will

>Trust

A trust is a legal agreement composed to ensure transfer of movable or immovable assets from one party to another. There are three parties involved while making a trust. Beneficiary- for whose benefit the trust is created, settlor- who is transferring his ownership and the trustee- who manages the trust. The trustee holds the legal title and exercises control over the trust property in the interest of the beneficiary. Living trusts are an essen t i a l t oo l o f es ta te

planning where the creator has liberty to protect his estate while he is alive and decide beneficiary of the same.Trusts are often formulated to avoid probate (a detail note on probate is provided later in this article).

Trusts can be either revocable or irrevocable. The first type is more flexible, meaning, the trust owner/ settlor can change the terms of the trust or modify the entire agreement or even revoke the trust altogether over t ime th rough t rus t amendment. The owner of a



revocable living trust can c h a n g e d e s i g n a t e d benef ic ia r ies , a l loca t ion strategy, listed assets, and appointed trustees while the trust is in force or even after its establishment.This type of a trust is considered as an alternate to a will.

Irrevocable trusts, which are more common in India, do not come with the provision of trust amendment. In a non-discretionary irrevocable trust, the sett lor has complete control over execution of terms of the trust. He is free to choose asset distribution among beneficiaries. While, in a discretionary irrevocable trust, the settlor lets the t r u s t e e s t a k e d e c i s i o n s regarding asset distribution. All revocable trusts convert into irrevocable living trust after the trust owner's death.

Trusts can be classified as private trust and public trust. Private trusts are commonly adopted for dual purpose of a) b e n e f i t s o f s e t t l o r ' s dependen ts and b ) t ax-planning.Private trust gets published in thenewspapers when executed. These also

offer an insolvency protection if it is an irrevocable trust. Private trust offers stepwise access to the family legacy.

>Joint ownership

Holding an asset under joint ownership helps transfer of that asset to the surviving joint owner with lesser hassle and expense. Financial assets like property, bank account and investments such as demat accounts, shares and mutual funds can be held jointly.

All joint owners' assent is mandatory to execute any t r a n s a c t i o n c o n c e r n i n g respective asset. Rights of survivorship suggest that joint holder/s receive ownership and profits earned from the asset after primary asset holder's death. However, this r i g h t i s s u p e r s e d e d b y succession laws if the primary owner is survived by his legit heirs.

>Gift

Gifts are commonly used to transfer wealth from one person (donor- the person gifting) to another (donee-receiver of the gift) voluntarily and without consideration.



Although this is an irrevocable asset transfer it can be revoked upon donee's agreement. Gifts received from relatives such as spouse, siblings of self and s p o u s e , p a r e n t s , g r a n d p a r e n t s , c h i l d r e n , grandchildren, among others and anyone e lse on the occasion of marr iage or inheritance through will avail taxexemption. Note that, while gifting an immovable asset a gift deed has to be made.

> Power of attorney

Power of attorney (POA) is ano ther common es ta te planning tool which authorizes a n o t h e r p e r s o n t o t a k e important financial or non-financial decisions on estate owner's behalf. The person granting the authority is called the principal and the one attaining it is called the agent. The purpose of drafting a POA document is to enable the agent participate and act on a transaction if the principal individual is incapacitated or as per his instructions.

There are three types of POA. In a general POA, the agent can act on all general matters on b e h a l f o f t h e p r i n c i p a l .

Whereas in a special POA, agent is given authority to act on special transactions only. In both these cases, agent's rights to actends if principal is incapacitated. However, a durable POA is an alternate way which enables the agent to cont inue take dec is ions despite principal's incapacity.

> Mutation

Mutation is transfer of title ownership in the municipal records. A property when acquired by a person and on becoming the rightful owner of the property should ensure that all the titles of the property are transferred or mutated in his name. Updating such change is necessary in order to decide tax liability of the property owner.

> Nomination

This provision faci l i tates investment holder to appoint a person who will hold and receive benefits from the investment upon holder's death. A minor can also be appointed as a nominee, with a guardian named alongside. You can appoint a nominee either at the time of initial



investment or during the course holding tenure.

But remember, nomination is jus t a rou te to s imp l i f y payment process in the event of holder's death, it does not ensure fa i r or equi tab le distribution of estate and cannot override inheritance laws.

>Will

Will is a written document in which an individual specifies how his wealth should be distributed or utilized after his death. In India, it is generally noticed that people refrain from creating a will and usually tend to leave the future to fate. This is a thought that should be avoided for the benefit of your heirs.

Writing a will is the simplest form of estate planning. You just need to write down in clear words your wishes, on a s i m p l e p i e c e o f p a p e r. Ambiguity of any type must be avoided, e.g. words which have multiple meanings, nick names, etc. Preferably, a lawyer should be appointed, who helps in making a will and g u i d e s i n t h e l e g a l i t i e s involved.

Will Glossary

Testator: The person making

the will.

Legatee/ beneficiary: The

person who is named in a will

to receive a portion of the

deceased person's estate.

Executor: The person named

in the will to administer the

estate of the deceased

person

Probate: A document from

court certifying legality and

granting execution of your

will.

A will must have the name and

address of the testator and a

statement that the will is being

m a d e v o l u n t a r i l y . T h e

beneficiaries under the will

must be clearly listed as must

the property that is being

bequeathed. It must be signed

by the testator and attested by

two witnesses.

A will has to be unambiguous

and certain as to its intent to

bequeath. To avoid disputes

only a single copy of latest

v a l i d w i l l s h o u l d b e i n

existence, witnesses should

sign in the presence of each



other, a residuary clause that

leaves all assets that remain

uncovered in the bequests to

an ident i f ied benef ic iary

should be included in the will

and a statement stating that the

cu r ren t w i l l r evokes a l l

previous bequests of any

nature should be included in

the will.

Registration of a will is not

mandatory, however, it is

recommended to do so to

avoid legal issues in the future.

It also makes it easier for your

heirs to get a probate. After all,

p roba te i s a conc lus ive

evidence of the validity and

due execution of the will and of

the testamentary capacity of

the testator.

When a person dies intestate

i.e. in the absence of a will,

intestacy laws are triggered.

Intestacy laws do not take into

consideration whether you

want to provide different gifts

to different children, based

upon their special needs or

other factors; whether your

surviving spouse or partner

needs your estate's assets in

order to provide for his or her

bas ic needs, whi le your

surviving parents have no

n e e d f o r y o u r m o n e y

whatsoever. Neither these laws

distribute your estate in a way

that provides the maximum tax

benefit to those who inherit

your estate.

Consider following scenarios

Will Nomination Process of transfer of assets

Available Unavailable Will is executed as soon as the probate is produced and

assets are transmitted to the account of legal heir(s), as

determined by an order of the competent court.

Unavailable Available

The estate or the rights bequeathed to nominees till the

legal successors of deceased take steps to claim

inheritance. Nominees cannot prevail over legal heirs.

Available Available

- If the nominee and beneficiary mentioned in the will are

same, the process of estate distribution takes lesser time.

- If they are not the same , estate is distributed among beneficiaries as per the testator’s wishes.

- But if nominee applies for transfer of asset before

execution of the Will takes place, assets are transmitted to

nominee’s account until terms in the will are executed.

Unavailable Unavailable Assets distributed among legal heir(s), as per respective

succession laws(based on proximity of the relationship).



Succession laws in India

There are numerous such

scenarios that might come up

in the absence of a will and that

can lead to entirely unwanted,

even tragic, outcomes. The

succession laws in India are so

diverse and complex that it will

create unnecessary hassles for

your surviving heirs and the

costs incurred in terms of time

and money will be immense.

The laws of succession in India

fall within the realm of personal

law. Because of this, we have

many different succession

laws. We have the Hindu

Succession Act, the Parsi

Succession Act, and the Indian

Succession Act (which applies

to Chr ist ians) . As far as

Muslims are concerned, the

l a w s o f s u c c e s s i o n a r e

governed by the relevant

Muslim Shariat Laws.

Probate

Probate means copy of the will

certified under the seal of a

c o u r t o f a c o m p e t e n t

jurisdiction.

Probate of a will when granted

establishes the will from the

death of the testator and

renders valid all intermediate

acts of the executor as such. It

is conclusive evidence of the

validity and due execution of

the will and of the testamentary

capacity of the testator.

Where a will was executed by a

deceased, succession to his

property is regulated by the

provisions of the will. If an

executor is named in the will,

he has to get the will probated

as it is mandatory under

section 213 of the Indian

S u c c e s s i o n A c t . A f t e r

obtaining probate, it is the duty

of the executor to carry out the

distribution of the property in

a c c o r d a n c e w i t h t h e

provisions of the will. Probate

can be granted only to the

executor appointed under a

will as is provided under

section 222. If no executor is

appointed by the will, anyone

of the persons claiming a right

under the will can file a petition

f o r o b t a i n i n g l e t t e r s o f

administration as is provided

under section 219.

Probate can be granted only to

the executor appointed by the

will. The appointment may be

e x p r e s s o r i m p l i e d b y



necessary impl icat ion. I t

cannot be granted to any

person who is a minor or is of

unsound mind, nor to any

association of individuals

unless it is a company satisfies

the conditions prescribed by

the rules made by the state

government.

A p r o b a t e d i f f e r s f r o m

succession cert i f icate. A

probate is issued by the court,

when a person dies testate i.e.

having made a will and the

executor or beneficiary applies

to the court for grant of

probate. In case a person has

not made a will his legal heirs

will have to apply to the court

for grant of a succession

certificate which will be given

as per applicable laws of

inheritance.

Last, but not the least, do not

keep your will arrangements a

secret. You need to share

i n f o r m a t i o n a b o u t t h e

e x i s t e n c e w i l l w i t h k e y

b e n e f i c i a r i e s , i n t e n d e d

guardians and executors. You

might not share the actual

content but keeping these

entities aware about your

having created a will and the

location where you have

stored the same might be a

good idea.

Who needs to make a will?

An earning couple, raising family

Husband and wife team-earn and invest. The investment

details are known only to the person making the investments

and the other spouse remains unaware. If something untoward

were to happen, the spouse left behind struggles to cope with

the sudden demise as well as with figuring out the entire

spread of investments.

Single parents raising children

They are sole earners as well as care givers to their children.

They need to take an additional step of creating a Will. The Will

would not only ease the bequest process – it becomes the

primary document to refer to for information about the assets.



Earning bachelors

Every earning individual who has built any kind of financial

asset needs to take asset protection into account. In the case of

a bachelor, a situation is possible where no one apart from the

person himself/ herself has any clue about the assets. A will

becomes very important for this person.

Individuals above 50

A will at this stage is a mandatory factor in your financial plan.

Especially when you have children or other family members,

irrespective of their financial independence. Also, if you want

to leave something to your friends or distant relatives, drafting

a will makes perfect sense.

Reviewing estate plan

An estate plan needs to be a

live goal – not a create-and-

forget one. Review and revise

it. You might have created new

assets or taken on a new

l iabil i ty over years. Your

marital status could have

changed or you might have

had children. Your executors

or guardians of your children

might change jobs and shift

countries. Owing to any of

t h e s e p o s s i b i l i t i e s , w e

recommend that you review

y o u r e s t a t e p l a n n i n g

documents at least every five

years to ensure its relevancy

w i t h y o u r f i n a n c i a l

circumstances. Better yet, take

some professional help to

organize your documents and

keep them updated.

The views expressed in the article are personal views of the author and do not necessarily represent the views of ICICI Securities

BUDGET REVIEW


Budget Review2018-19

24

Rejuvenating Bharat for inclusive

growth while balancing fiscal

In the backdrop of growing

expectations of a populist

B u d g e t c o u p l e d w i t h

apprehensions on imposition

of long term capital gains tax

on equit ies, the Finance

M i n i s t e r b a l a n c e d b o t h

extremes without straying

much from the path of fiscal

prudence. Union Budget 2018-

19 laid emphasis on “Ease of

Living” with due thrust to uplift

t h e r u r a l m a s s e s w i t h

e m p h a s i s b e i n g p u t o n

doubling farm income by 2022.

Remarkably, amid pressure on

existing resources, the Finance

Min is ter emphas ised on

increasing expenditure on

infrastructure development

including roads, airports,

railways, etc. On the fiscal side,

the deficit figure was pegged at

3.5% of GDP for 2017-18. We

believe this is a calibrated

measure balancing the need

for infrastructure develo -

pment, buoyancy on tax inputs

and social welfare.

The government focused on

generating employment and

reviving the growth engine in

the MSME space, with host of

incentives, including lowering

the corporate tax rate to 25%

for entities with turnover less

than Rs. 250 crore coupled

with other measures will have

m u l t i p l i e r e f f e c t o n

employment generation.

To broaden the equity tax base,

a tax rate of 10% was imposed

on incremental gains with

effect from January 31, 2018

for an equity holding period of

greater than a year on capital

gains exceeding Rs. 1 lakh.

M o s t i m p o r t a n t l y , t h e

apprehension over LTCG was

handled in a pragmatic way as

i t w a s i n t r o d u c e d w i t h

“grandfather ing c lause” ,

t h e r e b y d i s p e l l i n g t h e

investors' qualms.

Union Budget, indeed, seems

to be a prudent mix of thrust on

u p l i f t i n g r u r a l m a s s e s ,

generation of employment and

long term nation building

through solid infrastructure


BUDGET REVIEW

development.

Key highlights of upcoming Budget:

=The revision in fiscal deficit

target 3.2% to 3.5% is mainly

on account of lower GST

collections by Rs.35000 crore

(revenue accounted for only 11

months due to spill over

impact). This has resulted in

additional slippage of 0.2% in

the fiscal deficit for FY18RE.

With the focus on removing

rural distress and augmenting

farm income, the government

has revised its fiscal deficit

target to 3.3% from earlier

target of 3.0% for FY19E.

Although, there is a marginal

deviation from the previous

FRBM target, the government

has stick to its consolation

path.

=On the revenue front, we

expect government net tax

revenues to grow 16.1% YoY

to Rs.14.7 lakh crore in FY19E

on account of better recovery

in indirect taxes (up 18.5% YoY

to Rs.11.2 lakh crore) following

better compliance in GST (E-

way bill). Additionally, the

d i r e c t t a x e s c o l l e c t i o n

continues to remain buoyant

growing 14.8% YoY to Rs.11.5

lakh crore led by improved

business environment and

better compliance. With a

robust disinvestment pipeline

in FY18-19E, we believe the

g o v e r n m e n t h a s u n d e r

promised and is likely to over

deliver. We estimate proceeds

of over Rs. 1, 00,000 crore in

FY19E

=On the expenditure front,

government focus remains on

removing rura l d is t ress ,

improving infrastructure and

ease of living through better

d e v e l o p m e n t e x p e n s e s

(Budgetary allocation up by

9.3% to over Rs.5,90,000 crore

). The govt. announced world's

largest government-funded

healthcare programme which

wil l cover 10 crore poor

f a m i l i e s ( w i t h 5 0 c r o r e

bene f i c i a r i es ) p rov id ing

coverage up to Rs. 5 lakh per

family per year. In order to

make MSME companies more

v i a b l e , i n c o m e t a x f o r

c o m p a n i e s w i t h a n n u a l

turnover up to Rs. 250 crore (in

FY17) has been reduced to

25% which coupled with other

incentives will have multiplier


BUDGET REVIEW

impact on the employment

generation.

=Finally, we also highlight that

though government has

introduced LTCG in symbolic

way (revenues of Rs.20,000

crore in FY19E), it could act as

key catalyst in channelizing

resources towards 'ease of

living” while managing fiscal

deficit in long term as LTCG

contributes 0.7-1% in US

market.

Maintaining fiscal prudence with improved quality of spending…


BUDGET REVIEW

Aiming to double farm income by

2022 ; emphas i s on i ncome

insurance

=Union Budget 2018-19 is

pro-farmer in nature and well

aligned to double farm income

by 2022. Apart from the

increase in allocation towards

risk mitigation (crop insurance)

and eff iciency ( irr igat ion

including micro-irrigation)

schemes, i t lays specia l

emphasis on augmenting farm

income through remunerative

farm gate prices thereby

targeting “income insurance”

=Emphasis has also been

placed on fixing MSP prices at

a markup of 50% above the

cost of production while at the

same time bringing more

crops under the MSP net. It

also aims at procurement of all

major farm produce at MSP

price through the calibrated

coordination between the

central government, NitiAayog

and state government.

=To augment farm income, it

also aims to promote allied

activities like aquaculture,

animal husbandry, etc, while at

the same time save crop

wastages through requisite

storage and agro-processing

units

Higher allocation towards key

development schemes to improve

ease of living

The government has taken

effective steps to improve the

ease of living mainly led by

increased budgetary allocation

towards the Ministry of Road,

Transport & Highways (up

16.3% YoY to Rs. 70,544 crore),

railways (up 32.7% YoY to Rs.

53,060 crore) and urban

development (up 11.2% YoY to

R s . 5 0 , 8 6 8 c r o r e ) .

Consequently, the government

has increased allocation for

key development related

schemes by 14.1% YoY to Rs.

2,43,052 crore.

GST collections provides hope!

Union Budget 2019 provided a

greater degree of clarity on

GST collections. Revised

estimates for FY18pencil in the

Centre's share of collections

(CGST + IGST) at Rs. 3.8 lakh

c r o r e . W e t h i n k t h e s e

collectionsare for eight months

from July 2017-February 2018,


BUDGET REVIEW

w i t h t h e M a r c h 2 0 1 8

collections to be accounted

forin FY19. This implies a

monthly run rate of Rs. 47000

crore. FY19 collections have

been budgeted at Rs. 6.5 lakh

crore, (i.e. Rs. 54000 crore per

month), implying a budgeted

growth of 14.9%.

Against this, actual collections

for the six months from July-

December imply average Rs.

44000 crorebeing added to the

Centre's kitty on a monthly

basis. Thus, on comparing

actual collections thus far

toFY19 BE, the Centre seems

to be es t ima t ing 22 .7%

growth.

In our opinion, this is a

r e a s o n a b l e a s s u m p t i o n

because of the following

factors –

= I nc reased comp l i ance

brought on by a significantly

wider tax net: As per the recent

E c o n o m i c S u r v e y, t h e

numberof registrants under

GST is 9.8 million. Of this, 35%

registrants are new, i.e. those

that were not covered by

earlier indirect tax regimes of

Excise, Service Tax and VAT.

Th is represents a much

broader tax base for the new

systemand should result in a

boost to tax compliance and

eventually tax revenue

=E-way implementat ion:

Interstate e-way bill system on

goods valued above Rs. 50000

come in to e f fect . E -way

billimplementation in states

under the previous system

(pre-GST) had helped boost

revenues. E-way bil ls on

intrastategoods movement

will be rolled out from June 1,

2018 and places stringent

c o m p l i a n c e b u r d e n o n

assesses,restricting scope for

evasion

=Additionally, the impact of

c o m p o s i t i o n s c h e m e

taxpayers required to file

returns on a quarterly basis is

yet toaccrue.

Grandfathering capital gains till

January 31, 2018, government goes

ahead with LTCG

Long term capital gains (LTCG)

on equities will be taxed @

10% if gains exceed Rs. 1

lakh(without the benefit of any

indexat ion) . The holding


BUDGET REVIEW

period continues to be one

year andabove for LTCG. For

calculations, all gains til l

January 31, 2018 will be

grandfathered (exemptfrom

tax). The LTCG rate of 10% is

applicable from financial year

2018-19.

Views

=Since gains to be considered

for taxation are prospective,

t h e i m p a c t i s l a r g e l y

n e u t r a l f r o m a m a r k e t

perspective. Against the fear of

a deep sell-off, this seems to

have beenexecuted quite

modestly

=Equity oriented funds of MF

are huge in size at Rs. 10 lakh

crore (December 2017) and

havealready risen 79% in a

year. Charging LTCG tax on

gains from this base can also

raisesubstantial tax revenues

n o t f a c t o r e d i n a b o v e

calculations

=Unit linked investment plans

(ULIPs) are excluded from

c a p i t a l g a i n s a s n o t

specificallymentioned. This

will favour premium growth of

life insurance companies as

r e t u r n s f r o m U l i p f u n d s

become tax exempt

=Hence, on a growing base of

GDP and wider long term

capital gains tax net, reaching

0.7-1% of GDP on LTCG tax

c o l l e c t i o n , c a n a d d

s i g n i f i c a n t l y t o t h e

government's tax kitty overthe

years

Personal income tax: No major

change… senior citizens in focus

· The F inance Min ister has

refrained from effecting any major

change in thepersonal income tax

for individuals assesses. Income tax

rates and slabsremain unchanged

· Senior citizens are the most

b e n e f i t t e d c l a s s f r o m t h e

Budgetannouncement.

· Tax exemption on interest income

from savings bank accounthas

been increased from Rs. 10,000 to

Rs. 50,000 and now includeinterest

income from fixed deposits and

post offices deposits

· Deduction l imit for health

i n s u r a n c e p r e m i u m o r

medicalexpenditure increased

from Rs. 30,000 to Rs. 50,000 under


BUDGET REVIEW

section80D

· Increase in deduction limit for

m e d i c a l e x p e n d i t u r e f o r

certaincritical illness from Rs.

60,000 (in case of senior citizens)

and from Rs. 80,000 (in case of very

senior citizens) to Rs. 1 lakh for all

seniorcitizens, under section

80DDB.

· Pradhan Mantri Vaya Vandana

Y o j a n a , u n d e r w h i c h a n

assuredreturn of 8% is given by LIC,

extended up to March, 2020.

Theexisting limit on investment of

Rs. 7.5 lakh per senior citizen

underthis scheme has also been

enhanced to Rs. 15 lakh.

· The F inance Minister has

reintroduced standard deduction

for salariesclass individuals to the

extent of Rs. 40000 but removed

the existing annualtransport

allowance of Rs. 19,200 and

medical reimbursement of Rs.

15000.This has resulted in net

additional deduction of Rs. 5800.

The maximum taxbenefit for the

highest tax slab individual comes to

just Rs. 1740 excludingcess.

Standard deduction is now also

applicable to pensioners. The

moveis expected to benefit 2.5

crore employees and would result

in therevenue loss of Rs. 8000 crore

to the exchequer

· Ed u c a t i o n c e s s h a s b e e n

increased to 4% from current 3%

for allassesses and been renamed

as “Health and Education Cess”.

Additionalrevenue from this move

is estimated at around Rs. 11,000

crore

· Dividend distribution tax (DDT) at

1 0 % h a s b e e n i n t r o d u c e d

ondistributions by equity and

equity oriented mutual funds with

effect fromApril 1, 2018

· T a x b e n e f i t o n 4 0 % o f

withdrawals from NPS, which was

till now availableonly to employee

subscribers (i.e. salaried class) is

n o w e x t e n d e d t o

nonemployeesubscribers as well

with effect from April 1, 2019

· Section 54EC has been made

more stringent. From now on

onlyimmovable property (land or

building or both) shall be eligible

for thebenefit. Additionally, the

specified bonds would now need to

be held for aminimum period of

five years against three years

earlier


BUDGET REVIEW

· Tax treatment of fund of funds

(FoFs) investing only in domestic

equityETFs brought on par with

taxation of equity oriented funds

· The government would make

further use of ETF route for

disinvestments.DIPAM will come

up with more ETF offers including

debt ETF

· To ensure compliance, it has been

proposed that Chapter VI-A

deductionsshall not be allowed if

income tax return is not filed by the

due date

Other key highlights

=Flagship National Healthcare

p r o t e c t i o n s c h e m e w i l l b e

launched to cover 10 crore poor

fa m i l i e s ( w i t h R s . 5 0 c ro re

beneficiaries) providing coverage

up to Rs.5lakh per family per year

for secondary and tertiary care

hospitalisation. This will be the

world's largest government-

funded healthcare programme

= I n o r d e r t o m a ke M S M E

companies more viable, income

tax for companies with annual

turnover up to Rs.250 crore (in

FY17) has been reduced to 25%

=The government will contribute

12% of wages of new employees in

EPF in all sectors for the next three

years

=Allocation to Digital India

scheme doubled to Rs.3073 crore

=Total Rs.1 lakh crore will be

allocated over the next four years

towards an init iative named

Revitalising Infrastructure and

Systems in Education (RISE)

by2022. This will be done to step up

i n v e s t m e n t & r e l a t e d

infrastructure in in premier

educational institutions

=The government has allocated

Rs.9,975 crore for social security

schemes for the next fiscal year

Under Ujjwala Scheme, eight crore

(five crore last year) poor women

will be given free gas connection

=The government has earmarked

allocation of Rs.56619 crore for SCs

( R s . 5 2 7 1 9 c r o r e i n F Y 1 8 E )

&Rs.39135 crore for STs (Rs.32508

in FY18E) in FY19E

=The government proposes to set

up five lakh Wi-Fi hotspots, which

will provide broadband access to

five crore rural citizens. Total

Rs.10000 crore in 2018-19has been

p r o v i d e d f o r c r e a t i o n a n d


BUDGET REVIEW

a u g m e n t a t i o n o f t e l e c o m

infrastructure

=Total 3% primary & secondary

education cess on personal income

tax & corporation tax has been

increased to 4% & renamed as

“Health & education cess

=To develop 10 prominent tourist

s i t e s i n t o i c o n i c t o u r i s m

destinations, the government has

increased fund allocation under

SwadeshDarshan by 14.7% YoYto

Rs.1,100 crore

=Capital outlay on space research

increased substantially by 40% to

Rs.5287 crore (up from Rs.3777

crore)

= To e n c o u r a g e d o m e s t i c

manufacturing under "Make in

India", the government has hiked

BCD in mobile phones (from 10% to

20%), LCD/LED/OLED panels(from

7.5% to 15%) and lamps/ lighting

fittings (from 10% to 20%)

Rail capital expenditure outlay – Focus on modernisation

· Despite merger with the

Central Budget, investments in

Railways continues to remain

an important agenda. The

cen t ra l government has

i n c r e a s e d i t s c a p i t a l

expenditure outlay for FY18-19

by 22% YoY to Rs. 146500

compared to FY17-18 revised

estimate of Rs. 120000 crore

· Approximately 69% of the

capital outlay for FY19 has

been earmarked under major

heads of capital expenditure.

Augmentation of capacity with

construction of new lines and

h igher doubl ing are the

mainstay.

· M o r e o v e r , h i g h e r

electrification would lead the

way for lower fuel expenses

resulting in improvement of

320 bps in operating ratio from

96% in FY18 (RE) to 92.8% in

FY19 (BE) . The focus of

commissioning/addition of

new lines (1000 km) would

remain on enhancing the

capacity in suburban cities like

Mumba i and Benga lu ru .

Following the FDI in railways

f o r c o n s t r u c t i o n o f

locomotives at Bihar, the

budgeted estimates reflect IR

commitments to procure the

same


BUDGET REVIEW

Efficient Railways - Execution at theforefront…

Commitment vs Execution

A Rashtriya Rail SanrakshaKosh will be created

with a corpus of Rs. 1 lakh crore over a period of

5 years

Allocated a corpus of Rs. 20,000 crore each over

FY18 and FY19. Elimination of unmanned

levelcrossings by 2020 is on track

Throughput is proposed to be enhanced by 10%

in next three years. Focus on modernisationand

upgradation of identified corridors. Railway lines

of 3500 km will be commissioned in2017-18

against 2,800 km in 2016-17

In the first phase, South Eastern Railway, South

East Central Railway and East Coast Railwayare

identified for 25T axle load running. Long haul

trains will run across congested sections

toincrease throughput

At least 25 stations are expected to be awarded

during 2017-18 for station redevelopment.

500stations will be made differently abled

friendly by providing lifts and escalators

Redevelopment of Habibganj and Gandhinagar

started. Formulating attractive revised schemefor

station redevelopment to fast track the

programme. So far, 430 escalators at 167

stationsand 279 lifts at 122 stations have been

provided

Proposed to feed about 7,000 stations with solar

power in the medium term. A beginning

hasalready been made in 300 stations. Works will

be taken up for 2,000 railway stations as part

of1000 MW solar mission

Total 28.75 megawatt (MW) solar roof top

capacity has been installed on 350

stationsincluding major stations like New Delhi,

Old Delhi, Jaipur, Secunderabad and Kolkata.

Orderhas been placed for 37 MW solar roof top

capacity by Zonal Railways/PUs (covering 250

Focus is on Swachh rail. Post initiating SMS based

Clean My Coach Service propose to

stations)introduce ‘Coach Mitra’ facility, a single

window interface, to register all coach

relatedcomplaints and requirements

The facility shall be extended to all onboard

housekeeping service (OBHS) trains (1000)

in2017-18. ‘Coach Mitra’ facility has been

extended to 670 trains over 13 zonal railways

By 2019, all coaches of Indian Railways will be

fitted with bio toilets. Pilot plants forenvironment

friendly disposal of solid waste and conversion of

biodegradable waste to energyare being set up at

New Delhi and Jaipur railway stations. Five more

such solid waste

management plants are now being taken up

Target for 2017-18 is installation of 40,000

biotoilets. In November 2017, 5417 biotoilets

havebeen installed in coaches. On a cumulative

basis, 33856 bio-toilets have been installed.

Pilotplant at Jaipur Railway Station has been

installed with a target of five solid waste

managementplants by FY18

ASK OUR PLANNER


Maintain personal finance balance through Diversified portfolio

Q. I am regularly paying

premium of Rs. 10000/- per year for

"ICICI PruLifeTime Pension" taken

in January 2004, with maturity in

January 2021 as the policy term is

for 17 Years.

My queries are:

a.What would be the treatment

with respect to taxation, if I

surrender the above said policy

now?

b. I had taken the benefit of the

premium paid, till deduction was

allowed from the income, but after

the change in taxation rules, no

taxation benefit has been claimed

under 80C i.e. within the limit of Rs.

1,50,000/-.

c. Is the surrender value exempt

from tax under section 10 (10D), as

the policy has been issued in

January'2004 i.e. issued on/after

April 01, 2003 but on/before March

31, 2012, and the premium payable

for every year is less than 20% of

the sum assured. Premium is Rs.

10, 000/- and sum assured is Rs.

2,00,000/-

- HariSharma

A. As per the Section 80CCC(2) of Income Tax Act, if any amount available in a pension policy, in respect of which deduction has been allowed, together with interest or bonus, is received on account of surrender, then such amount is added to your income and taxed as per your income slab.

Interpreting the same would mean that the portion of surrender value on which deduction has been claimed on the premiums only would have to be added entirely to your income. For the balance portion, only the gains ( i .e. difference between that portion of s u r r e n d e r v a l u e o n w h i c h deduction has not been claimed on the premiums less premiums paid on which deduction has not been claimed) would have to be added to your income.Please consult your tax advisor for appropriateness.

Taxation of pension policy on surrender is covered under Section 80CCC(2) and not Section 10(10D) and hence, the percentage of premium paid on sum assured is immaterial. Section 10(10D) covers other life insurance policies.

34

ASK OUR PLANNER


2. What are ETFs? Are they better than Mutual Funds? Which market phase is ideal to invest in this instrument, bullish or bearish?

- Pankaj Upadhyay

A. Exchange Traded Funds (ETFs) are similar to mutual funds, but can be traded (bought & sold) through stock exchange. Both have their own advantages.

Mostly ETFs replicate an index and invest into stocks in the index in the same proportion to mirror the performance of the index and hence are passively managed. However, mutual funds are actively m a n a g e d a n d n e e d n o t necessarily mirror the index to which they are bench marked.

The expense ratio of ETFs is lesser compared to mutual funds, predominantly due to the reason that they are passively managed. As mutual funds are actively managed by fund managers, they look to generate higher returns.

ETFs are similar to mutual funds and can be invested regularly. Some brokerage firms offer SIP facility as well. If you are looking to invest into

35

equity asset class, it's always better to invest regularly, rather than waiting to invest during a specific time/phase.

Q. I am having ICICI Prudential Lifestage Pension policy taken in March 2008 with Annual premium INR 25000. I paid the premium for 4 years till 2011 and stopped after that. There is no sum assured. I want to surrender the policy. P l e a s e a d v i s e t h e t a x implications/liability for the same.

- Anuraag Bharti

A. As per the Section 80CCC(2) of Income Tax Act, the entire surrender value is added to your income and taxed as per your income slab, if deduction has been a l lowed under Section 80CCC(1) for the premiums paid. If deduction under Section 80CCC(1) has not been claimed for the premiums paid, tax might have to be payable on the Gain i.e. d i f f e r e n c e b e t w e e n t h e surrender va lue and the premiums paid; and if the surrender value is less than the premiums paid, there's no gain and no tax would have to be payable.

Q. I own a house, taken through home loan in 2014. I have been

ASK OUR PLANNER


Do you also have similar queries to ask our experts? Write to us at: [email protected].

36

Q. I have a life-stage pension policy taken in 2009 with no sum assured for 10 years. Every year I am paying a premium of Rs.3,00,000. Could you please advise me;

1. How will the tax be calculated on maturity in 2019?

2. How to avoid and/or reduce the impact of tax on maturity in 2019?

- KalaichelvanPakkirisamy

A . Yo u c a n w i t h d r a w a r d

maximum of 1/3 of the maturity policy in a pension policy as lumpsum at maturity and this amount is exempt

rdfrom tax. The balance 2/3 has to be invested into an annuity plan compulsorily, from which you would start receiving annuity regularly, which would be added to your income and taxed as per your income slab. In the years which you receive annuity, you can consider investing some portion of the annuity into any instruments w h i c h c a n p r o v i d e y o u deduction under Section 80C.

availing deductions u/s 24 & 80C for this property & loan in my individual return since last 3 years. Now I want to gift this house property to my parents. Please advise tax impact in my ITR for already claimed deductions or future deductions.

- Manas Kotari

A. Before gifting the property to your parents, you would have to approach the lender and take their consent, as the property is under mortgage. Most of the lenders hesitate to provide consent. If at all they provide their consent, then you can gift the property through a gift deed.

However, please note that if y o u t r a n s f e r t h e h o u s e property within 5 years from the year of possession, then any deduction claimed on principal repayment till then, would be added back to your income in the year of transfer. Also, you would not be eligible to claim any further deductions on the home loan payment, as you would no longer be the owner / co-owner of the property.

MUTUAL FUND ANALYSIS

Investing in ELSS funds


Equity linked savings schemes (ELSS) are diversified equity mutual fund schemes that are eligible for tax benefits under Section 80C of the Income Tax Act. It is the only fully equity investment option available under Section 80C. ELSS gives aggressive investors an ideal option to utilise tax benefit to invest in equity oriented funds. Effectively, ELSS are multicap mutual funds with similar return profile. The lock-in period of three years is lowest among other investment options available under Section 80C of the Income Tax Act.

Advantages of ELSS

§ Investment in ELSS is eligible for tax benefits under section 80C. Maximum tax savings up to | 46,350 on an investment of | 1.5 lakh in a financial year

§ ELSS invests in equity stocks, which has greater potential for long term capital appreciation. Professional, experienced f und m anager s ano the r positive.

§ Capital gains at the end of the lock-in period are completely tax free

§ The lock-in period of three years curtails panic selling in case of interim volatility in e q u i t y m a r k e t s . H e n c e , investments reap the benefit of long term investing in equities

§ S y s t e m a t i c m o d e o f investment (regular monthly investment) available

ELSS category nature

ELSS funds are the only fully equity-based investment option under Section 80C. As such, the performance potential of ELSS

funds is superior compared to alternatives like National Pension S y s t e m ( N P S ) , E m p l o y e e s Provident Fund (EPF)/Voluntary Provident Fund (VPF), Public Provident Fund (PPF) and tax-saving fixed deposits (FDs). ELSS funds have displayed consistent performance.

H is tor ica l ly, the ELSS fund performance has not deviated directionally from the performance of other equity fund categories. This is because ELSS funds have tended to invest across market caps – large, mid and small, thus keeping performance in line with the general performance of the wider equity markets, as a whole. This lack of market cap bias enables comparison of ELSS fund performance with that of multi-cap funds (also known as diversified equity funds). In recent times, ELSS funds have delivered returns in line with multicap funds.

Under th is background, we recommend the following funds: L&T Tax Advantage Fund, Franklin India Taxshield Fund and Reliance Tax Saver Fund

37



L&T Tax Advantage Fund

Fund Objective:To generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities.

Key Information:

Product Label:

Investors understand that their principal will be at moderately high risk

This product is suitable for investors who are seeking:• Long term capital growth• Investment predominantly in equity and equity related securities

Performance:The fund has been among the top two quartiles performance wise over the last one, three and five year periods (as of January 3 1 ) . I t h a s m a n a g e d t o outperform the category and the benchmark across these time f r a m e s . T h e m a r g i n o f o u t p e r f o r m a n c e o v e r i t s benchmark has increased in recent times. It has generated CAGR of 15.1% and 19.7% in the last three years and five years vs. 9.7% and 14.3% returns by benchmark, respectively (as of January 31, 2018)

Portfolio:Financial and consumption s t o c k s h a v e l e d t o outperformance of the scheme recently. Additionally, the fund

manager has demonstrated good stock picking ability in the commodities space as well as some turnaround opportunities by identifying gainers quite early

Fund Benchmark

Performance vs. Benchmark

38

NAV as on January 31, 2018 (`) 58.3

Inception Date February 27, 2006

Fund Manager Soumendra Nath Lahiri

Minimum Investment (`)

Lumpsum 500

SIP 500

Expense Ratio (%) 2.06

Exit Load Nil

Benchmark S&P BSE 200

Last declared Quarterly AAUM(` cr) 2927

36.6

15.1 19.7

15.9

30

9.7 1

4.3

11.7

0

10

20

30

40

1 Year 3 Year 5 Year Since Inception



on. The scheme is significantly overweight consumption stocks w h e n c o m p a r e d t o i t s benchmark although exposure has reduced recently in favour of financials. The fund has recently added names from the newly listed insurance players. There are more than 60 stocks in the portfolio with the weightage to

no stock being much above 4%. This reduces concentration risk at the portfolio level. However, the top four picks in terms of sectors contribute ~66% of the portfolio. The fund is slightly tilted towards large cap stocks but still holds significant amount of midcap stocks.

39

Our View:Investors with a slightly higher

risk appetite can consider the fund from a three-five year perspective.

You can view performance of other schemes being managed by the fund manager of this scheme on the following link:

https://www.ltfs.com/content/dam/lnt-financial-services/lnt-mutual-fund/downloads/factsheets/2017-18/LT%20Factsheet%20November% 202017.pdf

Data as on January 31,2018 ;Portfolio details as on Dec-2017Source: ACE MF, ICICI Direct Research

%

4.5

4.0

4.0

3.0

3.0

2.9

2.8

2.5

2.4

2.2

The Ramco Cements Ltd. Domestic Equities

Future Lifestyle Fashions Ltd. Domestic Equities

Kotak Mahindra Bank Ltd. Domestic Equities

Asset Type

Domestic Equities

Larsen & Toubro Ltd. Domestic Equities

Axis Bank Ltd. Domestic Equities

ITC Ltd. Domestic Equities

Graphite India Ltd. Domestic Equities

HDFC Bank Ltd. Domestic Equities

Housing Development Finance Corporation Ltd. Domestic Equities

ICICI Bank Ltd.

Top 10 Holdings

%26.5

17.0

15.1

9.4

8.0

5.4

5.1

2.8

2.7

2.4

Information Technology Domestic Equities

Others Domestic Equities

Consumer Staples Domestic Equities

Health Care Domestic Equities

Telecommunication Services Domestic Equities

Domestic Equities

Consumer Discretionary Domestic Equities

Materials Domestic Equities


Top 10 Sectors Asset TypeFinancials Domestic Equities

Industrials

%

0.9

1.5

Whats In

Cholamandalam Investment & Finance Company Ltd.

Sun TV Network Ltd.



DSPBR Taxsaver Fund

Fund Objective:The pr imary inves tment objective of the Scheme is to seek to generate medium to long-term capital appreciation from a diversified portfolio that is substantially constituted of equity and equity related securities of corporates, and to enable investors avail of a deduction from total income, as permitted under the Income Tax Act, 1961 from time to time.

Key Information:

This product is suitable for investors who are seeking*:

• Long-term capital growth with a three-year lock-in

• Investment in equity and equity- related securities to form a diversified portfolio.

Product Label:

Performance:The fund has outperformed its benchmark over most periods, however the performance has suffered over the last year. It has beaten the benchmark Nifty 500 Index by ~3.7% CAGR (three years) and ~5.4% CAGR (f ive years) (as of J a n u a r y 3 1 , 2 0 1 8 ) . T h e performance over the last year or so has suffered due to lower exposure to midcap stocks than i ts benchmark. The midcap space has enjoyed substantial rerating during this time, which has hurt funds that are tilted towards large caps.

Fund Benchmark


Investors under-stand that their principal will be at moderately high risk

40


Inception Date January 18, 2007

Fund Manager Rohit Singhania


Lumpsum 500

SIP 500


Exit Load Nil

Benchmark NIFTY 500


26.9

14.3 20.5

15.4

31.4

10.6 15.1

9.8

0

10

20

30

40




Portfolio:The portfolio has significant exposure to the financials sector, followed by materials a n d d i s c r e t i o n a r y consumption. In terms of portfolio construction, the fund has a significant large cap bias, with ~75% of the portfolio invested in such stocks with midcap stocks making up the rest. The proportion of large cap stocks in the portfolio has increased over the last month

or so. This has contributed to the recent underperformance to some extent, especially when compared to peers which are more multicap in nature. Currently there are ~70 stocks in the portfolio with individual weights to stocks not crossing 4% (except the top few picks). This indicates a focus on risk management. The fund currently has ~2.5% cash in the portfolio.

%

6.2

4.3

4.0

3.5

3.4

2.7

2.4

2.4

2.4

2.3

Top 10 Holdings Asset Type

HDFC Bank Ltd. Domestic Equities

Tata Steel Ltd. Domestic Equities

ICICI Bank Ltd. Domestic Equities

State Bank Of India Domestic Equities

GAIL (India) Ltd. Domestic Equities

Maruti Suzuki India Ltd. Domestic Equities

Hindustan Petroleum Corporation Ltd. Domestic Equities

ITC Ltd. Domestic Equities

Larsen & Toubro Ltd. Domestic Equities

CBLO Cash & Cash Equivalents and Net Assets

%29.8

14.3

11.0

10.5

6.4

6.3

5.3

5.1

4.7

2.3

Consumer Discretionary Domestic Equities

Industrials

Top 10 Sectors Asset TypeFinancials Domestic Equities

Materials Domestic Equities

Consumer Staples Domestic Equities



Domestic Equities

Energy Domestic Equities

Utilities Domestic Equities


%

0.6

0.8

1

Whats In

JB Chemicals & Pharmaceuticals Ltd.

Srikalahasthi Pipes Ltd.

Manappuram Finance Ltd.

%

0.6

0.70.5

Whats out

Techno Electric & Engineering Company Ltd.

Eris Lifesciences Ltd.AU Small Finance Bank Ltd.



Our View:Putt ing as ide the recent u n d e r p e r f o r m a n c e , t h e scheme has a good long term track record on its side. Due to

its positioning as a large cap tilted fund, it is suitable for slightly more conservative investors.


You can view performance of other schemes being managed by the fund manager of this scheme on the following link:

https://dspblackrock.com/quick-links/downloads?utm_source= CorporateWebsite&utm_medium=Homepage&utm_campaign=Navigation



Reliance Tax Saver Fund

Fund Objective:To generate long-term capital appreciation from a portfolio that is invested predominantly in e q u i t y a n d e q u i t y r e l a t e d instruments.

Key Information:

Product Label:

This product is suitable for investors who are seeking*:

• Long term capital growth

* Investment in equity and equity related securities.

Performance:The fund has consistently outperformed the category and its benchmark over the last year, 3 years and 5 years. It has been a top quartile performer in the last one-year period and 5-year period and a second quartile performer in the last 3-year period (as of January 31). The one year, three years and five-year performance (as of January 31) is 34.8%, 11.2% CAGR and 22.9% CAGR, respectively, as compared to BSE Sensex's 30.0%, 7.2% CAGR and 12.4% CAGR respectively (as of January 31).


Fund Benchmark

Investors under-stand that their principal will be at moderately high risk

PortfolioThe fund demonstrates a bias towards high growth and scalable businesses, which has helped it deliver well during the

good run for equity markets beginning from mid-2013. The portfolio earlier was multicap in nature with an almost equal split between large cap and

43


Inception Date September 21, 2005

Fund Manager Ashwani Kumar


Lumpsum 500

SIP 500


Exit Load Nil

Benchmark S&P BSE SENSEX


34.8

11.2

22.9

16.7

30

7.2 1

2.6

12.4

0

10

20

30

40




mid cap stocks. However recently it has added some more large cap stocks giving it a slightly greater large cap tilt. W h e n c o m p a r e d t o i t s benchmark, the scheme is underweight on financials and significantly overweight on automobiles. It has exited

some financial stocks over the last month. While some of the top stock picks have fairly healthy allocations, at the overall portfolio level the scheme seeks to mitigate concentration risk with a fairly large number of holdings (60+ currently).

44

%

7.3

7.1

5.2

5.0

4.3

3.8

3.7

3.2

3.1

2.9

Top 10 Holdings Asset Type

State Bank Of India Domestic Equities

TVS Motor Company Ltd. Domestic Equities

Tata Steel Ltd. Domestic Equities

ICICI Bank Ltd. Domestic Equities

Tata Motors Ltd. Domestic Equities

Infosys Ltd. Domestic Equities

Bharti Airtel Ltd. Domestic Equities

Honeywell Automation India Ltd. Domestic Equities

Bharat Forge Ltd. Domestic Equities

ABB India Ltd. Domestic Equities

%23.3

19.5

17.7

13.2

8.8

5.0

3.4

2.9

2.5

1.2

Industrials Domestic Equities

Materials

Top 10 Sectors Asset TypeConsumer Discretionary Domestic Equities

Financials Domestic Equities

Telecommunication Services Domestic Equities


Consumer Discretionary Rights

Domestic Equities




%

0.8

0.1

Whats In

Punjab National Bank

Union Bank Of India

%

1.3

0.20

Whats out

The Indian Hotels Company Ltd.

GIC Housing Finance Ltd.Reliance Communications Ltd.



Our View:The fund is slightly on the aggressive side with significant midcap holdings. However, the

portfolio is well constructed in terms of sector-level and stock-level diversification.

You can view performance of other schemes being managed by the fund manager of this scheme on the following link: https://www.reliancemutual.com/InvestorServices/FactsheetsDocuments/Fundamentals-December-2017.pdf

Performance of other schemes managed by these fund managers: 1. L&T Tax Advantage Fund

45

47.85 24.95 --42.30 18.16 21.5342.20 20.58 23.6922.60 3.45 7.5238.59 20.51 28.9731.36 16.28 19.83

26.82 10.49 17.7527.50 9.67 14.4021.27 12.09 18.505.12 7.80 8.48

10.11 4.15 14.015.12 7.80 8.48

Crisil Short Term Bond Fund IndexL&T Dynamic Equity Fund-Reg(G)

Fund Name 1 Year 3 Years 5 Years

Top 3 Performing Schemes L&T Emerging Businesses Fund-Reg(G)S&P BSE Small-Cap

Crisil Short Term Bond Fund Index

Performance of other schemes managed by the fund manager - Soumendra Nath Lahiri

L&T Infrastructure Fund-Reg(G)NIFTY INFRAL&T Midcap Fund-Reg(G)Nifty Free Float Midcap 100

Bottom 3 Performing SchemesL&T Equity Fund-Reg(G)S&P BSE 200L&T India Prudence Fund-Reg(G)

Note : The schemes may or may not have been managed by the same Fund Manager since its inceptionNote : The concerned Fund Manager manages 8 other schemes of the concerned Mutual Fund




46

2. DSPBR TaxSaver Fund


3. Reliance Tax Saver Fund

32.73 11.39 18.6327.50 9.67 14.4031.83 10.98 22.8326.67 8.57 13.4531.53 10.17 17.8726.67 8.57 13.45

-- -- --27.50 9.67 14.40

Performance of other schemes managed by the fund manager - Ashwani Kumar

Reliance Tax Saver (ELSS) Fund(G)S&P BSE 100Reliance Vision Fund(G)S&P BSE 100


Top 3 Performing Schemes Reliance Top 200 Fund(G)S&P BSE 200

Bottom 3 Performing SchemesReliance Capital Builder Fund-IV-B(G)S&P BSE 200


30.93 26.02 23.35-- -- --

30.29 13.24 17.6626.39 7.72 12.9226.19 15.74 20.2326.39 7.72 12.92

24.44 14.33 20.6326.39 7.72 12.92

Performance of other schemes managed by the fund manager - Rohit Singhania

DSPBR India T.I.G.E.R Fund-Reg(G)NIFTY 50DSPBR Opportunities Fund-Reg(G)NIFTY 50


Top 3 Performing Schemes DSPBR Natural Res & New Energy Fund-Reg(G)MSCI World Energy Index

Bottom 3 Performing SchemesDSPBR Tax Saver Fund-Reg(G)NIFTY 50


What is iCommunity?iCommunity is ICICIdirect's interactive platform where one can answer and get answered as well. With extensive range of forums, events & discussions iCommunity serves as an opportunity to learn more about financial world.

This month on iCommunity

Discussion

Do you think that LTCG taxation changes is a

good move by the Government?

As per the government, the total

exempted capital gains from listed

shares and units is around Rs 3,67,000

crore as per returns filed for A.Y.17-18.

Major part of this gain has accrued to

corporates and LLPs. Accordingly,

@10% LTCG tax revenue could have been Rs 36,700 crore in FY18, which is

a loss of almost 0.22% of GDP as market returns were high.

So, do you think that LTCG taxation on equities is a good move by the

Government?

Q & A Forum

Seek answers to your queries regarding investments

and market updates for free. Questions like:

> I am new to trading world. Is this the right time to

enter market?

> Should I square off xxxx stock @ target price of

Rs.xxx?

> Suggest top five mutual funds for short-term

investment.

47

Budget special

Be a part of discussion about Union Budget 18-

19, where our research team has decoded

Finance Minister's budget speech for you.

EQUITY MODEL PORTFOLIO


Our indicative large-cap equity model portfolio has continued to deliver an impressive return (inclusive of dividends) of 113.89% till date (as on February06, 2018) since its inception (June 21, 2011) vis-à-vis the benchmark index (S&P BSE Sensex) return of 97.22% during the same period, an outperformance of 16.67. This validates our thesis of selecting companies with sound business fundamentals that forms the core theme of our portfolio. Our midcap portfolio of 16 stocks continues to outperform well, delivering 323.39% (inclusive of dividends) till date (as on February 06, 2018) vis-à-vis the benchmark index (CNX Midcap) return of 148.24%, outperformance of 175.15%. Our consistent outperformance demonstrates our superior stock picking ability as markets aligned to our view of favourable risk reward, good franchisee vs. reward-at-any-risk businesses.

We have always suggested the SIP mode of investment and still find a lot of merit in it as the preferred mode of deployment given the market conditions and volatility associated since the inception of the portfolio. We highlight that the SIP return of our portfolio has consistently outperformed the indices.

Following the same pace and opportunities in the market, our portfolio (large caps) remain overweight on BFSI sector – HDFC Bank (10%), HDFC (9%), Axis Bank (6%) Bajaj Finance (6%) and SBI (6%). Affirming our view on consumption demand, Dabur (5%) and Asian Paints (5%) continue to be part of our large cap portfolio. However, there's an addition of metal sector- Hindustan Zinc (6%) in the revised portfolio.

We remain positive on auto, IT and pharma. We remain overweight to neutral on pure play defensives (IT, FMCG) as secular earnings coupled with sector rotation could lead to consolidation in near term valuations and offer stock specific opportunities.

Among individual names, we continue to recommend TCS in the IT space. A revival in the capex cycle coupled with lower interest rate scenario would benefit the BFSI and construction space (UltraTech, L&T, SBI, Asian Paints).

48



Name of the company

Largecap Stocks

Model Portfolio

Largecap(%)

Midcap(%)

Diversified(%)

49

Auto 16.0 11.2

Tata Motor DVR 4.0 2.8

Maruti 5.0 3.5

EICHER Motors 3.0 2.1

Mahindra & Mahindra (M&M) 4.0 2.8

BFSI 37.0 25.9

HDFC Bank 10.0 7.0

Axis Bank 6.0 4.2

HDFC 9.0 6.3

Bajaj Finance 6.0 4.2

SBI 6.0 4.2

Capital Goods 4.0 2.8

L & T 4.0 2.8

Cement 4.0 2.8

UltraTech Cement 4.0 2.8

FMCG/Consumer 18.0 12.6

Dabur 5.0 3.5

Marico 4.0 2.8

Asian Paints 5.0 3.5

Nestle 4.0 2.8

IT 6.0 4.2

TCS 6.0 4.2

Media 4.0 2.8

Zee Entertainment 4.0 2.8

Metals 6.0 4.2

Hindustan Zinc 6.0 4.2

Oil and Gas 5.0 3.5

GAIL Ltd. 5.0 3.5

Largecap share in diversified 100.0 70.0



ICICI Securities has received a mandate from Indian Bank'.ICICI Securities has received a mandate from Mahindra & Mahindra.

50

Auto 6.0 1.8

Bharat Forge 6.0 1.8

BFSI 20.0 6.0

Bajaj Finserve 8.0 2.4

J&K Bank 6.0 1.8

Indian Bank 6.0 1.8

Capital Goods 6.0 1.8

Bharat Electronics 6.0 1.8

Cement 6.0 1.8

Ramco Cement 6.0 1.8

Consumer 36.0 10.8

Symphony 6.0 1.8

Supreme Ind 6.0 1.8

Kansai Nerolac 6.0 1.8

Pidilite 6.0 1.8

Tata Chemicals 6.0 1.8

Bata 6.0 1.8

Metals 6.0 1.8

Graphite India 6.0 1.8

Infrastructure 8.0 2.4

NBCC 8.0 2.4

Logistics 6.0 1.8

Container Corporation of India 6.0 1.8

Textile 6.0 1.8

Arvind 6.0 1.8

Total 100.0 30.0

Midcap share in diversified 30

TOTAL 100 0 100.0

Performance* so far since inception

*Returns (in %) as on Feb 6, 2018

Large-cap Portfolio Benchmark: BSE Sensex; Mid-cap Portfolio

Benchmark: CNX Midcap; Diversified Portfolio Benchmark: Combination

of BSE Sensex and CNX Midcap

Value of 1,00,000 invested via SIP at the end of every month `

Portfolio Benchmark

Investment Value of Investment in Portfolio Value if invested in Benchmark

Start date of SIP: June 30, 2011; *Value as on Feb 6, 2018



113.89

323.39

160.22

97.22

148.24108.68

0255075

100125150175200225250275300325350

Large Cap Midcap Diversified

%

8.1

00.0

00

8200000

8200000

11572316.4

4

21801091.3

7

13057602.9

1

10834308.0

2

13035271.4

5

11799825.8

1

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

Largecap Midcap Divesified

|

QUIZ TIME

1. In a non-discretionary irrevocable trust, the settlor lets the

trustees take decisions regarding asset distribution.True/ False

2. After obtaining probate, it is the duty of the ___________ to

carry out the distribution of the property in accordance with the

provisions of the will.

3. If the nominee of an asset and beneficiary mentioned in the will

are same, the process of estate distribution takes__________

time.

4. If there is no will containing a guardianship designation, then a

judge will need to make the designation based on what he or she

decides is in the best interests of your child.True/false

5. ___________ is the person who is named in a will to receive a

portion of the deceased person's estate.

Note: All the answers are in the stories that have appeared in this

edition of ICICIdirect Money Manager. You may send in your

answers at: [email protected]. The answers will

be published in our next edition. The names of the earliest all correct

entries will be published too. So jog your grey cells and be quick to

send in your entries.

Correct answers for the January 2018 quiz are:

1. GDP growth of India recovered to 6.3% in second quarter of Fy18.

2. As per the latest data for 2017, equity based ETFs have received

almost double the record inflows seen in 2016.

3. Asset allocation is a trade-off between investment-specific risk

and return and is hence an antidote to market volatility.

4. Lower than expected GST collections would be an overhang on

deficit financing.

5. Agriculture loan waiver and increase in disposable income are

less likely to provide support to food & beverages consumption

and basic housing needs. False

Congratulations to the following winners for providing correct answers!

Rengaswamy Narasimhan, Richa Patil, N K Damle


PRIME NUMBERS

Equity Markets


Domestic Equity Indices

Global Equity Indices

Sectoral Indices

53

31-Jan-18 29-Dec-17 Change (%)

CNX Nifty 11028.0 10531.0 4.7%

CNX Midcap 20785.0 21133.5 -1.6%

S&P BSE Sensex 35965.0 34056.8 5.6%

S&P BSE 100 11419.0 11029.8 3.5%

S&P BSE 200 4812.0 4678.7 2.8%

S&P BSE 500 15347.0 15002.7 2.3%


Dow Jones 26,149.4 24,719.2 5.8%

S&P 500 2,823.8 2,673.6 5.6%

Nasdaq 7,411.5 6,903.4 7.4%

FTSE 7,533.6 7,687.8 -2.0%

DAX 13,189.5 12,917.6 2.1%

CAC 40 5,481.9 5,312.6 3.2%

Nikkei 23,486.1 22,764.9 3.2%

Hang Seng 32,887.3 29,919.2 9.9%

Shanghai Composite 3,480.8 3,307.2 5.3%

Taiwan Weighted 11,103.8 10,642.9 4.3%

Straits Times 3,534.0 3,402.9 3.9%


S&P BSE Auto 25,945.3 26,751.2 -3.0%

S&P BSE Bankex 30,986.0 28,856.8 7.4%

S&P BSE FMCG 10,711.0 10,695.2 0.1%

S&P BSE Healthcare 14,559.4 14,799.4 -1.6%

S&P BSE Metals 15427.4 14939.8 3.3%

S&P BSE Oil & Gas 16,368.2 16,283.3 0.5%

S&P BSE Power 2,319.0 2,381.7 -2.6%

S&P BSE Realty 2,609.1 2,608.3 0.0%

S&P BSE Teck 6,831.0 6,408.2 6.6%

PRIME NUMBERS


Debt Markets

Government Securities (G-Sec) Yields (in %) Jan-18 Dec-17 Change (bps)

Corporate Bond Yields (in %) Jan-18 Dec-17 Change (bps)

Commercial Paper (CP) Rates (in %) Jan-18 Dec-17 Change (bps)

Treasury Bill (T-Bills) Yields (in %) Jan-18 Dec-17 Change (bps)

Volatility Index (VIX)


VIX 15.93 12.67 0%

54

10 year 7.43 7.32 11

5 year 7.40 7.11 29

3 year 7.08 6.77 31

1 year 6.67 6.28 39

AAA 10 year 8.19 8.07 12

AAA 5 year 7.82 7.77 5

AAA 3 year 7.60 7.59 1

AAA 1 year 7.54 7.43 11

AA 10 year 8.61 8.44 17

AA 5 year 8.35 8.22 13

AA 3 year 8.14 8.05 9

AA 1 year 7.91 7.78 13

12 Months 7.98 7.53 45

6 Months 7.89 7.33 56

3 Months 7.76 7.06 70

1 Month 6.95 6.86 9

91D TB 6.40 6.20 20

182D TB 6.46 6.32 14

364D TB 6.55 6.40 15

PRIME NUMBERS

10-year benchmark yields (%) across countries


Macro-economic Indicators

Consumer price index (CPI)

Wholesale price index (WPI)Month

*WPI numbers are based on new series with 2011-12 as the base year'

55

Countries 31-Jan-18 29-Dec-17 Change in bps

US 2.705 2.405 30

UK 1.510 1.190 32

Japan 0.085 0.048 4

Spain 1.422 1.558 (14)

Germany 0.697 0.427 27

France 0.966 0.780 19

Italy 2.029 2.016 1

Brazil 9.720 10.256 (54)

China 3.922 3.902 2

India 7.430 7.326 10

MF Investment Jan-18 Dec-17 YTD

Equity 9083 8333 9083

Debt 22240 18998 22240

FII Investment Jan-18 Dec-17 YTD

Equity 12983 -4747 12983

Debt 9355 2433 9355

Items Weights(%) Nov-17 Dec-17 Jan-18

Food&bev. 45.86 4.41 4.85 4.58

Pan,tob& intox. 2.38 7.89 7.76 7.58

Cloth & Foot 6.53 5.04 4.95 4.94

Housing 10.07 7.36 8.25 8.33

Fuel & light 6.84 8.24 7.90 7.73

Misc. 28.31 3.72 3.79 3.78

CPI 100 4.88 5.21 5.07

Weights Oct-17 Nov-17 Dec-17WPI 100.0 3.59 3.93 3.58Primary Articles 22.6 3.33 5.28 3.86Fuel & Power 13.2 10.52 8.82 9.16Manufactured Goods 64.2 2.62 2.61 2.61

PRIME NUMBERS

Commodities

Sources for above data: Bloomberg, Reuters, CRISIL, MOSPI, ICICIdirect.com Research


Mutual Funds: Category Average Returns

Equity Funds Returns (in %)Tenure Diversified Funds Mid-cap &

Small-cap Funds

Large-capFunds

ELSS (Tax-

savingfunds)

Returns as on January 31, 2018

Debt Funds Returns (in %)

Returns as on January 31, 2018

Tenure Liquid Funds

Index of industrial production (IIP) Sector-wise growth rate (%)

Currencies and CommoditiesCurrencies

*IIP numbers are based on new series with 2011-12 as the base year'

Debt ST Ultra ST Debt LT

56

Categories 30-Nov-17 30-Oct-17 30-Sep-17 Weight(%)Mining 6.4 6.8 2.2 14.4Manufacturing 2.8 -1.3 1.5 77.6Electricity -6.5 -0.5 -3.2 8.0Overall 2.4 -0.3 1.2 100.0

31-Jan-18 29-Dec-17 Change (%) StatusUSDINR 63.6 63.9 -0.4% AppreciatedEURINR 79.2 76.5 3.5% DepreciatedGBPINR 89.9 86.3 4.2% DepreciatedAUDINR 51.5 49.9 3.2% DepreciatedCHFINR 68.2 65.5 4.1% DepreciatedJPYINR 0.6 0.6 3.0% DepreciatedCNYINR 10.1 9.8 3.0% Depreciated

31-Jan-18 29-Dec-17 Change (%)Crude ($/barrel) 68.8 66.8 3.0%Gold ($/ounce) 1,345.2 1,303.1 3.2%

6 months 9.59 11.73 7.80 9.361 year 29.69 34.01 27.89 29.853 year 11.95 16.29 9.35 11.705 year 18.37 25.47 15.38 18.15

6 months 6.10 3.77 5.26 0.16

1 year 6.17 5.33 6.08 3.08

3 year 7.10 7.57 7.58 6.75

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