NAVIGATOR - 11-6-20€¦ · Prologue CEO SPEAK In the aftermath of the pandemic and the consequent...

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Volume 19JUNE 2020

For Private Circulation Only.

Resumption & ResurgenceUnlock 1.0

Prologue

Quite Briefly

Global challenges remain unchallenged yet

India Macro

India: Equity markets buoyant on lockdown reversal

India: Fixed Income

Gold continues to price in risk premium

The "greenback" holds its sway as currency markets stay more or less calm

Brent

Enhanced Efficiency Model: En Ef Model

Recommended Equity schemes

Recommended Debt schemes

Emkay L.E.A.D PMS

PMS products update

Emkay Capital Builder PMS

Estate & Succession Planning

HUF & Transfer of Assets

Notes

Model Portfolio

Disclaimer

03

05

06

09

13

16

18

20

21

22

23

26

29

31

32

33

34

38

39

40

NAVIGATOR | VOLUME 1902

Prologue

CEO

SPE

AK

In the aftermath of the pandemic and the consequent lockdown, there was an inestimable amount of panic and distress, which has been felt around the world. To a large extent, relief came in the form of quantitative easing and liquidity enhancement measures, from the governments and central banks. While these measures take time to show their effects, there is a general feeling that the economies may not sink deeper than where they are at present. It is an accepted reality that the world will have to grapple with negative growth in the coming two to three quarters and some green shoots may emerge thereafter. The financial markets too, after the initial fall, recovered close to a third of their lost ground, and the bears currently display some sort of fatigue. The probability of a severe fall in the markets is substantially reduced going by the recent trends. This stability is required in the first place for the markets to register a positive upward move that is sustainable. But it is anybody’s guess that we are somewhere near the bottom in terms of the index levels.

Apart from the time when we will be able to conquer the pandemic, and the final success in finding a medical remedy for the same, there are several events that may cause some amount of disturbance to the emerging calm. The standoff between China and the US especially in the matter of Hong Kong, and its consequences for trade and commerce, and the face-off between India and China at the border, are events that may, in some form or the other, influence the progress that we make in the economic revival that we are looking forward to. Medical experts have also warned of potential second wave of infections. The UN has highlighted in the recent days the disastrous effect that the locust infestation may have on global agricultural output. I have highlighted these events to drive home the fact that there are likely things that may cause turbulence during the voyage.

The principles that govern our basic approach to invest-ments do not undergo any changes in the light of all these developments. We live in a low interest rate scenario supported by high liquidity, and it should give us comfort as far as fixed income investments are con-cerned. With the likelihood of higher NPA levels and defaults, we need to be careful while approaching credit risk. It is better to go with high credit rating and quality portfolios. This choice is very important as we will not

BHAVESH SANGHVI

know which way the wind is blowing in a generally fluid credit market conditions. It should also be borne in mind that the liquidity glut that we see in the money market may wane due to the heavy government borrowing programme. Therefore, while tactical positions taken in long bonds may be fruitful for very short spells of time, strategic allocations should be more at the short to medium segment on the curve.

With a view to accommodating the probability of any fall in markets, and the time taken for revival in economic growth, and with the objective of building up the portfo-lio over a period time, we have recommended phased investments in equities over the next two to three quar-ters. This prescription of going with a systematic invest-ment plan remains intact, with a greater preference for large caps followed by midcaps. It is also a good idea to look at some exposure to gold, either through gold funds or sovereign gold bonds. As far as equity goes, one should be betting on good quality portfolios only, and this requires constant affirmation. Businesses which have strong balance sheets, and leadership in their respective sectors, have amply demonstrated as to how they would be able to weather many a storm in the recent past. I strongly suggest well-managed portfolios both from the mutual funds and PMS space. I am delighted to mention that the two strategies that we run in the PMS space, the Emkay LEAD and the Emkay’s 12, have consistently outperformed their benchmarks, and have also held quite well during the last market crash.

Hope you are all keeping fit and fine, in good health.

Cheers!! Bhavesh SanghviCEO, Emkay Wealth


In the aftermath of the pandemic and the consequent lockdown, there was an inestimable amount of panic and distress, which has been felt around the world. To a large extent, relief came in the form of quantitative easing and liquidity enhancement measures, from the governments and central banks. While these measures take time to show their effects, there is a general feeling that the economies may not sink deeper than where they are at present. It is an accepted reality that the world will have to grapple with negative growth in the coming two to three quarters and some green shoots may emerge thereafter. The financial markets too, after the initial fall, recovered close to a third of their lost ground, and the bears currently display some sort of fatigue. The probability of a severe fall in the markets is substantially reduced going by the recent trends. This stability is required in the first place for the markets to register a positive upward move that is sustainable. But it is anybody’s guess that we are somewhere near the bottom in terms of the index levels.

Apart from the time when we will be able to conquer the pandemic, and the final success in finding a medical remedy for the same, there are several events that may cause some amount of disturbance to the emerging calm. The standoff between China and the US especially in the matter of Hong Kong, and its consequences for trade and commerce, and the face-off between India and China at the border, are events that may, in some form or the other, influence the progress that we make in the economic revival that we are looking forward to. Medical experts have also warned of potential second wave of infections. The UN has highlighted in the recent days the disastrous effect that the locust infestation may have on global agricultural output. I have highlighted these events to drive home the fact that there are likely things that may cause turbulence during the voyage.

The principles that govern our basic approach to invest-ments do not undergo any changes in the light of all these developments. We live in a low interest rate scenario supported by high liquidity, and it should give us comfort as far as fixed income investments are con-cerned. With the likelihood of higher NPA levels and defaults, we need to be careful while approaching credit risk. It is better to go with high credit rating and quality portfolios. This choice is very important as we will not

Prologue know which way the wind is blowing in a generally fluid credit market conditions. It should also be borne in mind that the liquidity glut that we see in the money market may wane due to the heavy government borrowing programme. Therefore, while tactical positions taken in long bonds may be fruitful for very short spells of time, strategic allocations should be more at the short to medium segment on the curve.

With a view to accommodating the probability of any fall in markets, and the time taken for revival in economic growth, and with the objective of building up the portfo-lio over a period time, we have recommended phased investments in equities over the next two to three quar-ters. This prescription of going with a systematic invest-ment plan remains intact, with a greater preference for large caps followed by midcaps. It is also a good idea to look at some exposure to gold, either through gold funds or sovereign gold bonds. As far as equity goes, one should be betting on good quality portfolios only, and this requires constant affirmation. Businesses which have strong balance sheets, and leadership in their respective sectors, have amply demonstrated as to how they would be able to weather many a storm in the recent past. I strongly suggest well-managed portfolios both from the mutual funds and PMS space. I am delighted to mention that the two strategies that we run in the PMS space, the Emkay LEAD and the Emkay’s 12, have consistently outperformed their benchmarks, and have also held quite well during the last market crash.

Hope you are all keeping fit and fine, in good health.

Cheers!! Bhavesh SanghviCEO, Emkay Wealth


Quite BrieflyWe have the latest GDP numbers now. Sluggishness in economic growth was a feature of the Q2 and Q3 of 2020, and it was accentuated in Q4. So, the number was more or less expected to indicate decline from the 4.00% and 4.50% levels; GDP growth has been reported at 3.10%. This number fully reflects the sluggish growth which the economy has been going through over the last six to eight quarters. What is more important is the extent to which Q1FY21 GDP growth may contract from the current levels reflecting the lockdown and the resulting demand destruction.

The overall liquidity conditions in the interbank market, and the level of interest rates continue to support equity markets. The last policy announcement by the RBI brought down the base rates further. But what needs to be achieved is effective transmission of these measures to the last borrower, and the channelization of credit to desired sectors which are in need of credit and liquidity.

One of the positive factors for the economy and the markets was the announcement of stimulus package worth ₹20 Lakh Cr. This includes the liquidity and credit enhancement measures already initiated by the RBI. While this package of fiscal, liquidity and credit guarantee measures and direct transfer initiatives are a strong support for the economy for its longer-term revival, most of the measures are supply-side measures. The demand side measures are few in number or indirect in nature. Generally, demand side measures are faster in their impact on the economy and they have multiplier effect on economic activity.

There are a number of concerns like the fiscal slippages on account of the enhanced borrowing program of the central and state governments. Other concerns centre around the weak local currency, and the likelihood of revision of country rating in the light of the overall economic con-ditions and the fiscal situation. Post the permitted moratorium, there may be NPAs with the banking system and the non-bank finance companies, and this is cited as a dampener by many analysts. The outcomes in most of these concerns would depend on how fast the pandemic is contained, and how systematically we come back to normalcy leaving behind the constraints of the lockdown.

The dichotomy in the response of the short and mid-sector as against the long end continues to be a feature of the markets. Fixed income investments should be in high credit quality papers or strategies. Preferred segment on the yield curve is short to medium term. The risks pertaining to demand-supply mismatch due to increased central and state government borrowing, coupled with the inherent volatility of high duration strategies, make the short to medium term duration investments better, on a risk-adjusted basis. Investments into banking and PSU debt funds, corporate debt funds and short-term income funds offer potential for better risk-adjusted returns. The equity markets display some amount of stability and the probability of corrective downward movements cannot be ruled out. But deeper corrections may not happen unless there is significant deterioration in the overall macro-economic scenario. It is an evolving situation, and much would depend on the impact of the fiscal and monetary measures. However, the principle of phased investments may be followed, in well-managed funds and portfolios which have quality stocks.

Dr. K. Joseph ThomasHead Research, Emkay Wealth


Global challenges remain unchallenged as yet.

The challenges which the global economy has been facing since the outbreak of the pandemic con-tinues to be unchanged and unresolved to a large extent. The pandemic itself has spread to new regions and has spread havoc in the US, and has affected India too, a major contributor to global growth. That it is yet to be contained and that there is no remedy that has been discovered so far is a matter of concern and this may continue to infuse uncertainties into the global system for some more days to come. Only a firm indication of a journey out of this is likely to bring in lasting stability in econ-omies and markets. In addition to this, the UN in its latest communication, has warned about the impact of the attack of swarms of locusts on agriculture and farm output which may lead to rise in farm produce prices if the destruction is going to be widespread. The two fundamental economic challenges at hand are combatting the almost certain contraction in economic growth, and the urgent need to explore the ways and means to arrest a severe deflation.

CHALLENGES REMAIN MORE OR LESS THE SAME

The sagging US consumer sentiment shows a small uptick after a fall in two months - March and April. Analysts believe that this may be due to the benefits that households have received from the Federal Government allowing them to spend more, discounts offered by a large number of consumer product firms to promote their products, and also the availability of funds at lower interest rates. While the uptick is quite insignificant as an indicator for longer term trend, the key question is whether this small rise could be sustained against the large figure of 38 million who have filed for unemployment benefits. Most Americans consider health and their personal finances as their primary concern, because those surveyed feel that the way out of the current crisis could be tortuous and longer than expected. The GDP growth, for the current quarter and for the next, by all calculations is expected to display a severe contraction which is much worse than any in the recent history.

SMALL UPTICK IN US CONSUMER SENTIMENT

The unemployment rate spiked to 14.70% and there were widespread job losses in some of the labour-intensive sectors like hospitality (hotels and restaurants), transport, education, and healthcare services. Almost half of all the job losses are concentrated in these sectors. The conditions referred to as one of the worst in the post-second world war time. The relaxation in the lockdown norms over the coming two months should see most of the key businesses re-open, and large number of those who were laid off may be called back. This is expected to bring down the unemployment levels to some-where close to 9 or 10%. The automobile industry alone accounts for job losses of close to 400,000 and the reopening of the economy is likely to bring almost all of them back to work. But the global economic contraction, assessed to be around 3 to 4%, and the likely contraction of growth in the US may not allow the economy to effectively give employment back to all those retrenched in the imme-diate term.

US LABOUR MARKET IN DOLDRUMS



The issues with China which seemed to be abating have come back again in the reckoning in a big way. With the closure of the first phase of the agreement with China, things seemed to have reached a final stage. But a spate of issues including the riot-like spread of the pandemic in the US, allegations of lack of transparency in the way China handled the outbreak, the Chinese activity in the South China Sea with occasional skirmishes with the US navy, the modification in the status of Hong Kong, in disre-gard for the original deed, acquiring greater control of the city state through domestic legislation, etc. have led to the current conflict between the US and China, and it is not going to be an easy ride for both parties as the disputes and disagreements touch the inherent differences in the very basic prin-ciples that govern the two societies. The preferred treatment enjoyed by Hong Kong in several mat-ters has also been ended by the US. This may be the precursor to a prolonged period of conflict between the two large economies both in the political and economic arena.

CHINA IS BACK AGAIN AT THE CENTRE

16

14

12

10

8

6

4

2

0

Jan

-10

Jun

-10

Nov

-10

Ap

r-11

Sep

-11

Feb

-12

Jul-1

2D

ec-1

2M

ay-1

3O

ct-1

3M

ar-1

4A

ug

-14

Jan

-15

Jun

-15

Nov

-15

Ap

r-16

Sep

-16

Feb

-17

Jul-1

7D

ec-1

7M

ay-1

8O

ct-1

8M

ar-1

9A

ug

-19

Jan

-20

US Unemployment Rate (%)

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

Jul-

09

Jan

-10

Jul-1

0Ja

n-1

1Ju

l-11

Jan

-12

Jul-1

2Ja

n-1

3Ju

l-13

Jan

-14

Jul-1

4Ja

n-1

5Ju

l-15

Jan

-16

Jul-1

6Ja

n-1

7Ju

l-17

Jan

-18

Jul-1

8Ja

n-1

9Ju

l-19

Jan

-20

8000000

7000000

6000000

5000000

4000000

3000000

2000000

1000000

0

US Jobless Claims


The Chinese economy contracted by 6.80% in Q1 of 2020, compared to a growth of 6% in Q4 of 2019. The decline is deeper than forecasts. This fall reflects the impact of the pandemic on the economy. This is the first steep fall in growth after China started publishing statistics in 1992. The decline in industry was to the tune of 9.60%, and agriculture and services sector fell by 3.20% and 5.20% respec-tively. The inherent ability of the Chinese economy to bounce back remains strong. Inflation was slightly lower at 3.30% in April, lower from 4.30% in March. Strangely, even food prices came down during this period. Exports from China showed an impressive up-move, it rose by 3.50% Y-O-Y in April, against expectations of a median fall of about 12% in the wake of the pandemic. Exports of medicines, masks, medical equipment, etc. rose including to countries like Australia, South Korea, and Japan. April industrial output also rose with all segments registering an uptick. The numbers seem to suggest a fast reviving economy after the pandemic.

CHINA LEAVES BEHIND THE PANDEMIC EFFECTS

Germany's economy contracted by 2.20% in Q1 of 2020. This is the steepest decline since 2009 and the second decline since the unification of Germany. Consumption of households declined by 3.20%. Infla-tion has slowed down, and it is expected to drop drastically due to drop in energy costs and slowing food inflation, and consumer sentiment indicates a moderate rise. In France, the economic growth declined by 5.30% in Q1 of 2020. This is the most severe contraction in GDP since 1968. The shrinkage in GDP started from late 2019 and it has now been accelerated by the pandemic and the shutdown. UK GDP declined by 1.60% in Q1 of 2020. The fall is the result of the economic distress caused by the pandemic and the general shutdown. A further drop is expected in Q2. Consumption spending also slowed down. The whole of 2019 witnessed a recessionary contraction in Italy with a mild pick up in the last quarter of 2019. But the small gains were totally undone by the severe jolt received by Italy due to the pandemic that ravaged the northern part of Italy and the consequent lockdown and disruption in economic and business activity. GDP in Italy contracted by 5.40% in Q1 2020. Like in the rest of Europe a deeper contraction is expected in Q2 of 2020.

EUROPE HAS MILES TO GO



India Macro

The GDP growth for Q4FY20 was reported at 3.1% as compared to a growth of 5.7% during the year ago period. The official numbers were higher than street expectations. The sequential slowdown witnessed in growth numbers during FY20 was expected to have even worse impact on Q4 numbers. The full year FY20 GDP growth has been reported at 4.2% as compared to 6.1% for the previous finan-cial year.

The GVA (GDP adjusted for taxes) was reported at 3% for Q4FY20 and the full year growth is pegged at 3.9%. The GDP press release noted that the data flow has been impacted by the lockdown and the government has also extended the timeline for submitting the financial returns. This may lead to revision of both quarterly as well annual growth numbers.

The current set of reported data indicates that Agriculture and Mining have been the key industries to support the overall growth. Agriculture and allied activities were expected to be one of the least impacted by the slowdown. Public Administration, Defence and Other Services was another segment that continued to report healthy growth rates. In an environment of weak private consumption and capital expenditure, government spending was required to do the heavy lifting.

While the current set of economic growth data can potentially be revised downwards, the full impact of the lockdown will be reflected in the Q1FY21 numbers. The lead indicators are signalling a severe slowdown in the economy and have even led to sharp downward revisions in full year GDP estimates for FY21. The current estimates of market participants have pegged the GDP growth for FY21 between 0% to more than 5% contraction. Given the grim outlook on economic growth, Moody’s has even downgraded India’s sovereign rating from Baa2 to Baa3 with a negative outlook, one notch above junk. The weakness in growth, stress on fiscal position and low effectiveness of policy reforms were the key reasons cited by the rating agency for the rating downgrade.

GDP

The National Statistics Office (NSO) in its CPI press release, provided index numbers for select sub-groups whereas headline inflation numbers were not declared owing to the nationwide lock-down hindering the process of data collection. The data collection activities have been suspended

CPI

% Change Over Previous Year

2018-19 2019-20Industry

1. Agriculture, Forestry & Fishing

2. Mining & Quarrying

3. Manufacturing

4. Electricity, Gas, Water Supply & other Utility Services

5. Construction

6. Trade, Hotels, Transport, Communication

and Services related to Broadcasting

7. Financial, Real Estate & Professional Services

8. Public Administration, Defence and Other Services

GVA at Basic Prices

2.4

-5.8

5.7

8.2

6.1

7.7

6.8

9.4

6

4

3.1

0.03

4.1

1.3

3.6

4.6

10

3.9


India Macro

The numbers coming out of the latest CPI press release hold little value in terms of its impact on the policy decisions. In the wake of COVID-19 led economic disruptions, addressing growth concerns would find precedence in monetary as well as fiscal policy decisions as is also visible from the recent actions.

We had discussed in the previous issue that food basket remains the only component that can potentially see some upside. The over stocking by households and supply disruptions owing to the lockdown situation could have been the possible reasons pushing-up the prices of food articles. Thus, we believe, it is one of the critical aspects which policy makers need to keep an eye on. The runaway inflation in food articles can have second round effects on inflationary expecta-tions. To keep a lid on inflationary expectations, it would be critical to ensure smooth functioning of supply side logistics.

VIEW

The IIP growth witnessed a sharp contraction of 16.7% for the month of March 2020, as compared to growth of 4.6% in the preceding month and 2.7% recorded during the year ago period. While street estimates expected a contraction in IIP growth, the actual numbers were worse than expectations. The coronavirus pandemic affected the production facilities, but the growth num-

IIP

10.49%

Jan

-14

Ap

r -1

4Ju

l -14

Oct

-14

Jan

-15

Ap

r -1

5Ju

l -15

Oct

-15

Jan

-16

Ap

r -1

6Ju

l -16

Oct

-16

Jan

-17

Ap

r -1

7Ju

l -17

Oct

-17

Jan

-18

Ap

r -1

8Ju

l -18

Oct

-18

Jan

-19

Jan

-20

Ap

r -1

9Ju

l -19

Oct

-19

Consumer Food Price Index16.00%

14.00%

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%

-2.00%

-4.00%

with effect from 19th Mar ’20. The inflation data for only such commodities or services sub-groups was declared for which adequate trade data was available. The headline CPI based inflation for Mar ’20 was revised downwards from 5.91%, declared earlier, to 5.84%.

The groups or sub-groups of CPI for which data compilation have been possible are Food & Beverages, Housing and Health (within Miscellaneous group). The CFP inflation for the month of Apr ’20 was reported at 10.49% as compared to 8.76% in the preceding month. Within the food basket, majority of the components saw the pace of inflation quickening during the lockdown period. The inflation for the Housing segment was reported at 3.94% for the month of Apr ’20 as compared to 3.69% during the preceding month.

Given the paucity of data, the core inflation numbers could not be calculated as well.


The IIP growth was expected to contract for the month of March, but the complete impact of the nationwide lockdown will be reflected in the index numbers for the month of April as was indicat-ed by the PMI numbers. The unprecedented situation of the global pandemic and the resultant lockdown will have its impact on the production numbers; going ahead the focus would be on the road to normalisation, which may be a long drawn one. A smooth recovery would be depend-ent on the policy responses (both fiscal and monetary) that addresses both the spectrums of the economy, supply as well as demand. Both the segments of the economy may require sops to ensure limited impact and a gradual recovery. The IIP numbers may remain subdued over the medium term as demand is only expected to recover gradually. As has been the case over the recent past, the government may have to do the heavy lifting in terms of expenditure to support the economy.

The immediate impact of the IIP numbers may be seen in the downward revision of GDP growth numbers of FY21, which may in turn negatively impact the earnings expectations of corporates.

VIEW

bers have come as a surprise, as the month of March represented only a minor part of the lockdown period. Owing to the nationwide lockdown, the data flow from producing units was impacted, the Quick Estimates are likely to undergo revisions. The IIP growth for FY20 was reported at -0.7%.

The growth for the manufacturing sector, representing more than 77% of IIP, was reported at -20.6% for the month of March as compared to 3.1% in the preceding month, and 3.1% during the year ago period. All of the 23 industry groups forming part of the manufacturing sector reported negative growth rates for the month of March. The growth rates of the other two sectors, Mining and Electric-ity, remained lacklustre as well. The Mining sector activity remained non-existent as the growth rate was reported at 0% for Mar ’20. The Electricity sector growth rate was reported at -6.8%. The growth rate for Mining, Manufacturing and Electricity sector for FY20 was reported at 1.7%, -1.3% and 1.1% respectively.

A similar trend was seen in use-based classification as well. The growth rate for all the segments of the use-based classification was reported in negative territory. The performance was weakest in Capital Goods and Consumer Goods categories. For the entire year of FY20, use-based classifica-tions was negative in case of Capital Goods, Infrastructure/Construction Goods and Consumer Dura-bles, whereas expansion was reported for Primary Goods, Intermediate Goods and Consumer Non-durables.

India Macro

-20.0-15.0-10.0-5.00.05.0

10.0

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73.

22.

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31.0

4.8

4.1

1.88.

57.

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6.5

4.8

4.6 8.

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2 2.5

1.6 0.2 2.

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1.34

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4.6 6.6 2.

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4 2.1 4.6

-16.

7

Jun

-17

Au

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7

Oct

-17

Dec

-17

Feb

-18

Ap

r -1

8

Jun

-18

Au

g -1

8

Oct

-18

Dec

-18

Feb

-19

Ap

r -1

9

Jun

-19

Au

g -1

9

Oct

-19

Dec

-19

Feb

-20

INDEX OF INDUSTRIAL PRODUCTION


The manufacturing activity remained in a contractionary zone as indicated by the PMI numbers for the month of May. The manufacturing PMI for the month of May came in at 30.8 as compared to 27.4 in the preceding month. A reading above 50 indicates expansion. The new orders with contractors continued to contract resulting into a weaker output. The orders from international markets too continued to contract; the PMI press release noted that the global measures to con-trol the spread of COVID-19 has stifled the exports.

In the wake of severe slowdown in new orders, the manufactures further reduced the worker numbers. The cut in head count was the most severe in the history of the PMI’s survey. In line with the reduced worker requirement there was also a marked reduction in input buying. The input cost continued to ease for the manufacturers, but their ability to take benefit of the same remains restricted given the deceleration in demand.

PMI

The situation for the manufacturing community remains grim, as they face the unprecedented challenge of surviving the lockdown. The policy measures might help them temporarily, but the real issue is of demand revival. The timeline of the longevity of the pandemic and the resultant lockdown are the factors dictating the current economic situation. The uncertainty surrounding the extent of the pandemic may keep the manufacturing activity subdued for an extended period of time.

The measures announced till date are mostly addressing the concerns of the supply side. In order to shorten the economic pain period and ensure a relatively swift revival once the lockdown is lifted, the policy measures may have to shift their focus towards generating demand. A negative output gap provides the opportunity to address the demand side, without being overly con-cerned about inflationary risks. The second critical factor is the opening-up of export markets. An enhanced focus on export promotion may also help the manufacturers better utilise the spare capacity.

VIEW



The sluggishness in economic growth was a feature of the Q2 and Q3 numbers, and it was accentuat-ed in Q4. So, the number was more or less expected to indicate decline from the 4.00% and 4.50% levels; the GDP growth has been reported at 3.10%. This number fully reflects the sluggish growth which the economy has been going through over the last six to eight quarters. What is more impor-tant is the extent to which Q1FY21 GDP growth may contract from the current levels reflecting the lockdown and the resulting demand destruction. The first assessment point towards a marginally positive number for Q1. This is more or less affirmed by the core sector numbers which were released a few days back. The core sector output contracted 38% indicating the likely dent in growth over the coming months. For the markets to move up in a sustainable fashion, the economy should stabilise first and then start moving up.

GDP AND CORE SECTOR GROWTH NUMBERS

The overall liquidity conditions in the interbank market, and the level of interest rates continue to support equity markets. The last policy announcement by the RBI brought down the base rates further. But what needs to be achieved is effective transmission of these measures to the last borrow-er, and the channelization of credit to desired sectors which are in need of credit and liquidity. This will be very important for the economic recovery to happen, in the absence of which, the entire spectrum of measures which the RBI pro-actively took ahead of time may prove to be of no use.

LIQUIDITY IS GOOD BUT TRANSMISSION AND CHANNELIZATION ARE IMPORTANT

NIFTY BANK - TRI

NIFTY REALTY - TRI

Nifty Financial Services - TRI

NIFTY MEDIA - TRI

NIFTY METAL - TRI

NIFTY SERV SECTOR - TRI

NIFTY AUTO - TRI

NIFTY 50 - TRI

NIFTY ENERGY - TRI

NIFTY INFRA - TRI

NIFTY IT - TRI

NIFTY MNC - TRI

NIFTY CONSUMPTION - TRI

NIFTY FMCG - TRI

NIFTY PHARMA - TRI

-39.99

-39.53

-34.53

-34.06

-32.37

-27.74

-23.85

-20.93

-16.65

-11.85

-9.66

-8.97

-6.64

-2.59

-22.05

-50.00 -40.00 -30.00 -20.00 -10.00 0.00 10.00 20.00 30.00

YTD Performance



One of the positive factors for the economy and the markets was the announcement of stimulus package worth ₹20 Lakh Cr. This includes the liquidity and credit enhancement measures already initiated by the RBI. The notable fiscal stimuli from the government is an enhanced allocation to MNREGA, ₹3 Lakh Cr credit guarantee for MSMEs for easy loans, FDI in defence to the tune of 74%, support of ₹50,000 Cr for MFs, emergency working capital support for farmers, credit card for farmers, relaxation in TDS by 25% and also reduced contribution to EPF by individuals and companies in addi-tion to the extension of moratorium on repayment of loans. While this package of fiscal, liquidity and credit guarantee measures and direct transfer initiatives are a strong support for the economy for its longer-term revival, most of the measures are supply-side measures. The demand side measures are few in number or indirect in nature. Generally, demand side measures are faster in their impact on the economy and they have multiplier effect on economic activity. In the case of supply side measures, they have a slower but certain impact and they are considered better in non-emergency situations or as a non-interventionist approach.

FISCAL & MONETARY STIMULI PREPARE THE GROUND FOR RECOVERY

One of the encouraging features today is the sporadic investments that is coming from FIIs which could be an indication that their interest in the markets is probably reviving gradually. Only an unin-terrupted participation from them may be able to bring the exuberance back into the markets. This time around, the quantitative easing in the US which is expected to be to the order of US$4 trillion, may be monitored more closely for the end use of the funds in the light of the experience last time. The funds were not properly utilized the last time and there was diversion of funds into undesirable areas. This has been discussed more in public nowadays. This may also prevent the kind of inflows that were seen into riskier assets like last time around.

SPORADIC INVESTMENTS FROM FIIS

There are many concerns expressed by economists and analysts alike. These are about the likely fiscal slippages on account of the enhanced borrowing program of the central and state governments in an extraordinary year like this when the nation faces a health emergency and a consequent economic and financial emergency. Therefore, fiscal slippages are bound to happen, especially in the light of the low tax and non-tax revenue realisations. But the path to normalization beyond this time is what is actually important in the long run. Other concerns centre around the weak local currency and the likelihood of revision of country rating in the light of the overall economic conditions and the fiscal situation. Post the permitted moratorium, there may be some rise in the NPAs with the banking system and the non-bank finance companies, and this is cited as a dampener by many analysts. The outcomes in most of these concerns would depend on how fast we contain the pandemic, and how systematically we come back to normalcy leaving behind the constraints of the lockdown.

A FEW CONCERNS PLAGUE THE ECONOMY


The markets display some amount of stability, and the probability of the markets moving to much lower levels does not exist at this juncture, though corrective downward movements cannot be ruled out. But deeper corrections may not happen unless there is significant deterioration in the overall macro-economic conditions. It is an evolving situation and would also depend on the emerging impact of the fiscal and monetary measures. However, the principle of phased investments may be followed, in well-managed funds and portfolios which have quality stocks.

INVESTMENT PREFERENCES


Broader Markets

Nifty 50 - TRI

31-D

ec-2

019

07-

Jan

-20

20

14-J

an-2

020

21-J

an-2

020

28-J

an-2

020

04

-Feb

-20

20

11-F

eb-2

020

18-F

eb-2

020

25-F

eb-2

020

03-M

ar-2

020

10-M

ar-2

020

17-M

ar-2

020

24-M

ar-2

020

31-M

ar-2

020

07-

Ap

r-20

20

14-A

pr-

2020

21-A

pr-

2020

28-A

pr-

2020

05-

May

-20

20

12-M

ay-2

020

19-M

ay-2

020

26-M

ay-2

020

120

100

80

60

40

20

0

Nifty Midcap 100 Nifty Smallcap 100 - TRI


The RBI in its Monetary Policy Committee meeting reduced the repo rate by further 40bps to 4%. Accordingly, the MSF and reverse repo rate stand reduced to 4.25% and 3.35% respectively. This was an off-cycle MPC meet and was scheduled in the wake of incoming macroeconomic data. The MPC voted unanimously to reduce the policy rates, while the quantum of the rate cut was decided with a 5-1 majority. The key guiding factor for the policy decision was the emerging outlook for both domes-tic as well as the global economy.

As per the RBI’s assessment, going by the Q1 2020 GDP numbers for few of the economies, the global economy is headed towards a recession. The GDP growth (for both DEs and EMEs) have been in the range of 2.9% to -14.2%, with majority of them reporting contraction. The global services and purchasing managers PMI too indicated towards a severe slowdown in economic activity. On the domestic front as well the MPC’s outlook remains grim. The central bank estimates the domestic economy to contract for FY21. It is expected that growth may remain depressed during H1FY21 and gradually recover from H2FY21 onwards. The combined effect of monetary and fiscal measures should support the economic revival. The RBI has refrained from assigning any numbers to the growth expectations as the extent of slowdown and the recovery are both contingent on the containment of the pandemic.

On the inflation front, the outlook is uncertain owing to the difficulties in collating data. The current assessment is mostly based on the pressure seen on food prices. The upside risks to inflation are expected to only emanate from food articles and that too is seen subsiding going ahead. The uptick witnessed in the latest Consumer Food Price Index is owing to supply shocks resulting from the lock-down situation. As the lockdown is eased and transportation improves, the prices of essentials may correct from the current levels. The RBI expects headline inflation to remain sticky during H1FY21 and maintain an easing trend in H2FY21.

The current prognosis of the situation by the central bank indicates that the policy rates may remain lower for longer. The governor’s statement mentions that the macroeconomic impact of the pandem-ic is severe than earlier anticipated and the MPC stands committed to maintaining an accommoda-tive stance as long as it is necessary to revive growth. Unprecedented times call for unprecedented responses; the supply as well as demand conditions have deteriorated, and it would require a strong policy support to ensure businesses survive the slump. The inflationary risks remain at the margins, but the policy response may not entirely depend on food inflation. The RBI may even choose to ignore price risks temporarily to ensure growth engine stays on track.

India: Fixed Income


India: Fixed Income

The confluence of multiple factors such as seasonal corporate liquidity requirements, FII selling, risk averseness due to increased perception of credit risk impacted the debt market sentiments over the recent past and led to sharp spike in yields. The intensity of the risk perception was reflected in the redemption pressures faced by the mutual fund industry; it even led to closure of a few credit oriented mutual fund schemes. Since then, the RBI has moved swiftly and decisively to calm the nerves and provide liquidity to the embattled market participants.

In conjunction with the rate cuts, the RBI announced several other measures such as LTRO, TLTRO (1 & 2), refinance facilities for NABARD/SIDBI/NHB, reduction in CRR, special liquidity facility for mutual funds and OMO purchases that served the dual purpose of providing much needed liquidity and lowering market rates. The RBI Governor highlighted in his statement, post the latest policy decision, that the liquidity premia in debt markets has eased considerably and even the transmission through bank lending rates has improved. The MCLR rate has eased by 90bps from Feb ’19 till May ’20 and the WALR has eased by 114bps over the same period.

The RBI’s focus on improving transmission and ensuring swift revival of growth, that is expected to experience contraction over the near term, may lead to further monetary actions by the RBI. The central bank will have to deploy all weapons in its arsenal; the rate cuts will continue to be accompanied with other measures that help in keeping rate volatility under check and fast track-ing the benefits of monetary actions to the economy.

Thus, we believe the fixed income space continues to offer lucrative opportunities for investors to earn stable income and possible mark-to-market gains. The investment advice would continue to be in favour of high credit quality paper or strategies. The investors should refrain from taking opportunistic calls to invest in credit-based strategies. Apart from an actual credit event (default or downgrade), a change in risk perception may negatively impact the credit spreads. The preferred segment on the yield curve is short to medium term. The risks pertaining to demand-supply mismatch due to increased central and state government borrowing, coupled with the inherent volatility of high duration strategies make short to medium term duration investments better risk-adjusted options.

FY15 FY16 FY17 FY18 FY19 FY20

2.5

2

1.5

1

0.5

0

2.25

0.99

1.95

1.09

0.8

0.15

Upgrade/Downgrade Ratio


Gold continues to price in risk premium.

These funds are the primary route through which investors can allocate the investible surplus in gold asset class. The underlying asset of these funds is Gold ETF. The key feature of gold savings funds is that investors do not require any demat account to invest in these funds. The transactions can be executed in a manner identical to other mutual fund schemes. The onus of providing liquidity to the investors too falls on the fund house, thereby providing easy exit to the investors at the time of redemption.

GOLD FUNDS

Gold prices remained above the US$1700 levels and the prices seem to be well supported at higher levels. The risk premium which gold commands is the result of the uncertainties in the global economy resulting from the rapid spread of the pandemic, and the failure to contain it as well as the delay in discovery of a remedy for it in the form of vaccines. Along with currency majors, gold also is considered a safe haven in times of uncertainty and excessive volatility in financial markets. The cut in interest rates by central banks and the easy money policy followed by them have added sheen to gold prices especial-ly in the last two months. There are also reports of fall in gold imports as well as a drastic fall in retail demand for gold. This may be due to the lockdown and the consequent fall in mobility, and this may be revived in the coming months once the restrictions on movements are lifted.

It may also be noted that the US-China trade and tariff war gave a push to gold prices during the course of the last one year though it subsided after the first trade pact between them in December 2019. The situation has changed drastically with the fresh sanctions imposed on China by the US in the wake of the new legislation concerning Hong Kong. This is in addition to the friction prevailing in the South China Sea and the charges that China was not transparent on the coronavirus outbreak for a long time which resulted in the same reaching other countries.

Uncertainty premium will continue to support prices, and the demand from central banks and institu-tional investors is likely to rise and will keep the demand robust during the course of this year, apart from the inflows into ETFs. Investment portfolios should have a 5% allocation to gold irrespective of the current economic conditions alone.

Technically, the resistance levels to watch are 1730, 1780 and 1800, and the crucial support levels are 1540, 1430 and 1358.

Details of the alternative modes for investments into gold like Gold Funds, Gold ETFs, and Sovereign Gold Bonds is given in the following paragraphs.

Scheme Name

HDFC Gold Fund(G)

Kotak Gold Fund(G)

MCX GOLD SPOT

Nippon India Gold Savings Fund(G)

BenchMark

AUM(Rs in Cr.)

478

387

921

CAGRAbsolute

10.07

9.71

9.69

3Months

23.05

23.34

22.56

6Months

15.80

16.78

15.36

3Years

10.16

10.47

9.94

5Years

1Year

19.40

18.91

19.58

-3.22

-3.44

-2.08

-3.26

1Months

0.00 8.22 12.45 8.826.73

9Months

44.79

47.14

44.98

27.87


Returns as on 31st May 2020.

SGBs are Government of India securities, with the issuance handled by RBI and provides one more option in lieu of investing in physical gold. The tenor of these bonds is 8 years with exit option after the 5th year. The investment and maturity value reflect the prevailing price of gold at that point of time. The upcoming issuances of SGBs are as follows:

SOVEREIGN GOLD BONDS

The second option available to investors is to directly buy Exchange Traded Funds (ETFs). Investors need to have a demat account to invest in ETFs as the nomenclature suggests the units of these funds are traded on the exchange and investors need to execute their transactions (buy/sell) on the bourses.

GOLD ETFS

Gold continues to price in risk premium.

Scheme Name

HDFC Gold ETF

Kotak Gold ETF

MCX GOLD SPOT

Nippon India ETF Gold BeES

BenchMark

AUM(Rs in Cr.)

1093

1830

3650

CAGRAbsolute

10.84

10.76

10.63

3Months

24.31

24.32

23.98

6Months

16.45

16.29

16.20

3Years

10.59

10.53

10.57

5Years

1Year

17.29

17.73

17.61

-3.22

0.61

0.59

0.57

1Months

0.00 8.22 12.45 8.826.73

9Months

46.67

47.45

47.01

27.87

S. No. Tranche

1

2

3

4

2020-21 Series III

2020-21 Series IV

2020-21 Series V

2020-21 Series VI

Date of Subscription

June 08-12, 2020

July 06-10, 2020

August 03-07, 2020

Aug.31-Sept.04, 2020

Date of Issuance

June 16, 2020

July 14, 2020

August 11, 2020

September 08, 2020



The “greenback” holds its sway as currency markets stay more or less calm.

Currency Levels

Sept-19Currency Dec-19 Jan-20

107.76US$/JPY

Feb-20 Apr-20

109.50 109.90 111.50 107.50

7.10US$/Yuan 6.99 6.90 7.03 7.07

1.2470GBP/US$ 1.3035 1.3040 1.2950 1.2510

1.0999Euro/US$ 1.1135 1.1070 1.0815 1.088

Apr-20

107.20

7.149

1.234

1.109

There are fresh worries for the currency markets originating from the renewed stand-off between the US and China. The new position is the result of the perceived lack of transparency on the part of China in the context of the outbreak of the pandemic, the legislation to tighten the controls over Hong Kong, and the repeated skirmishes in the South China Sea. The situation is expected to escalate in the coming weeks with rhetoric on both sides flaring up in intensity in the recent past. While it is still not clear whether there will be any trade restrictions against China, even the slightest indication of such a move could cause disruption in the markets, which may even get transmitted to some of the regional economies. The US dollar continues to hold its sway, and the Euro too seems to be well supported with probable movement into Euro denominated assets by global investors. The containment of the pan-demic in Europe has also come as a relief for the European financial markets.

For India, the trade data for the last month shows a further fall in both exports and imports, and the fall is to the tune of 60%. This fall is due mainly on account of the standstill in the global economy with no movements post the lockdown. The likelihood of the same picking up is high but over the next three months, as the travel restrictions and trade starts afresh. Since both exports and imports are down, the facts are neutral to the domestic currency. While the FII investments continue to be nega-tive, there have been some inflows on account of the negotiated deals by a prominent corporate entity for its technology platform. The forex reserves have gone up by US$10 billion during the course of the last month indicating that the central bank probably picked up some dollars from the local market. The dollar-rupee exchange rate continues to be around 76 with movements within a narrow range for most part of the trading in the last three to four weeks. The broad range for the Rupee may be 75.30 to 76.10 in the immediate term. The fact that emerging market assets are considered to be high risk, and given the current state of uncertainties, it is less likely that there may be substantial inflows in the near term. Therefore, the currencies also may be more or less stable to lower.


BrentBrent recovered quite a bit of its lost ground as it powered back to the US$35 level and is set to move up further. In our last update on oil, the two factors that were mentioned as potential factors that could revive oil prices were, (i) the lifting of the business and travel shutdown, and (ii) the curtailing of output progressively by OPEC+. Both these factors are gradually coming to the fore and that is aiding the rise in oil prices. But the moot question asked is whether this would help some of the companies to come out of bankruptcy and persistent financial difficulties. Also, whether this will help some of the shale companies. Saudi Arabia and UAE are likely to cut supply more than what was agreed earlier, and it is expected that suppliers like Russia would also join in restraining output as the very economics of oil is not working in anyone’s favour, and therefore, the need to take more emphatic steps in that direction. Even with the perils of lower economic growth embracing a larger part of the global econo-my, the signs of a faster than expected growth revival, on account of the quantitative easing and fiscal stimuli, is likely to support oil prices as economic activity gathers pace and normalcy returns. The target, earlier indicated as a potential price range of US$35-US$40 per barrel, remains intact, and the probability of this range being overshot cannot be ruled out. The demand of oil from China is expected to be strong as demand to the extent of almost 90% of the pre-march levels has been already attained. This may fuel another uptick in prices. There is a lot of noise from Russian oil companies asking for support and tax benefits in the light of the financial difficulties. Most of these peripheral develop-ments may also contribute to the market remaining well-bid in the near term.

Brent Crude140

120

100

80

60

40

20

0

May

/10

Oct

/10

Mar

/11

Au

g/1

1Ja

n/1

2Ju

n/1

2N

ov/1

2A

pr/

13Se

p/1

3Fe

b/1

4Ju

l/14

Dec

/14

May

/15

Oct

/15

Mar

/16

Au

g/1

6Ja

n/1

7Ju

n/1

7N

ov/1

7A

pr/

18Se

p/1

8Fe

b/1

9Ju

l/19

Dec

/19


Enhanced Efficiency Model: En Ef ModelEstate and succession planning is the process of anticipating and arranging for the disposal of estate during and after one's lifetime. In absence of a succession plan, the assets of the deceased would be distributed as per the applicable religious laws amongst the legal heirs.

FUND SELECTION PROCESS

ALPHA GAMMA OMEGABETA

Scanningfunds for

compliancewith

hygienefactors

Fundsevaluatedon returnbased andrisk based

factors

Compre--hensive

ranking ofFunds

Final FundList andModel

Portfolio

EQUITY SCHEMES SELECTION PROCESS

HYGIENE FACTORS | MINIMUM SCHEME AUM | MINIMUM TRACK RECORD | RANKING PARAMETERS

SCHEMERETURNS

PORTFOLIOANALYTICS

SCHEMERISK

QUALITATIVEFACTORS

RECOMMENDED SCHEMES

Point to PointAbsolute / CAGR

Returns

Average RollingReturns

Downside Risk

Net Selectivity

Treynor Ratio

Information Ratio

Sector Concentration

Stock Concentration

AMC Lineage/Pedigree

AMC Equity strategy

AMC Size

OutperformanceRatio

Fund ManagementExperience

Fund ManagementStrength

Portfolio Composition(Sector / Company)

DEBT SCHEMES SELECTION PROCESS

HYGIENE FACTORS | MINIMUM SCHEME AUM | MINIMUM TRACK RECORD | RANKING PARAMETERS

SCHEMERETURNS

PORTFOLIOANALYTICS

SCHEMERISK

QUALITATIVEFACTORS

RECOMMENDED SCHEMES

Point to PointAbsolute / CAGR

Returns

Average RollingReturns

AMC Lineage/Pedigree

AMC Debt strategy

AMC Size

Fund ManagementExperience

Fund ManagementStrength

Credit Quality

Average Maturity /Modified Duration

YTM

Scheme Size

Sharpe Ratio

Semi StandardDeviation


Recommended Equity Funds


ELSS Category Fund Manager AUM(Rs in Cr.)

19632941

930 -0.89-0.39-1.69

-2.31-2.32

-15.00-13.98

-19.93-19.46

-12.31-11.72

-19.17-17.86

-7.25-5.64

-0.930.29

3.624.11

10403184

Axis Long Term Equity Fund

Canara Rob Equity Tax Saver Fund

ICICI Pru LT Equity Fund (Tax Saving)

Invesco India Tax Plan

Kotak Tax Saver Fund

BenchmarkNIFTY 500 - TRI

S&P BSE 200 - TRI

-1.25-0.55

-16.31-16.83-15.40

-15.75-14.28

-15.71-18.08-19.63

-15.31-11.33

-7.31-9.11

-10.32

-6.17-2.78

-12.81-16.95-15.14

-9.54-11.18

-5.08-3.53-3.36

-2.55-0.27

1.60-0.822.26

4.713.58

4.673.99

-

5565 3.12 -13.78 -19.23 -10.64 -18.93 -5.90 -0.45 3.13

5.905.06

CAGR Returns (%)Absolute Returns (%)

Jinesh Gopani

Cheenu Gupta

Harish Bihani

Dhimant Kothari

Harsha Upadhyaya

Mirae Asset Tax Saver Fund Neelesh Surana

1Month

3Months

6Months

2Years

3Years

5Years

1Year

9Months

Large & Mid CapSchemes

Fund Manager AUM(Rs in Cr.)

484622828839245510131429

-0.76-0.91-1.37-0.460.59-0.65

-2.32-2.13

-2.01 -14.96 -18.95 -10.63 -17.63 -7.58 -0.69 4.17

-14.26-16.36

-19.86-19.52

-12.25-11.39

-18.60-19.14

-6.13-8.54

-0.10-1.47

3.784.27

-17.31-16.85-15.33-20.57-21.91-15.48

-14.25-18.60-17.41-20.19-23.61-18.09

-4.22-10.07-7.57-11.60-13.47-9.75

-14.22-13.96-12.78-18.86-19.54-14.09

-6.56-5.59-1.98-7.44-7.77-3.80

-0.181.732.06-1.41-0.63-0.05

6.874.579.823.004.543.47

Miyush Gandhi

Taher Badshah

Neelesh Surana

Saurabh Pant

S. Krishnakumar

Canara Rob Emerg Equities Fund

Invesco India Growth Opp Fund

Mirae Asset Emerging Bluechip

SBI Large & Mid cap Fund

Sundaram Large & Mid Cap Fund

Tata Large & Mid Cap Fund

BenchmarkNIFTY200 -TRINifty Large Midcap 250 Index-TRI

S&PBSE 250 Large Mid Cap65:35 Index -TRI


Chandraprakash Padiyar

1Month

3Months

6Months

2 3Years

5Years

1Year

9Months Years


Large Cap Category Fund Manager AUM(Rs in Cr.)


Axis Bluechip Fund

BNP Paribas Large Cap Fund

Canara Rob Bluechip Equity Fund

ICICI Pru Bluechip Fund

Mirae Asset Large Cap Fund


NIFTY 50 - TRI

S&P BSE 200 - TRI

12717748418

2182115347

-2.030.29-0.172.37-0.95

-14.49-12.08-11.72-12.67-15.39

-14.33-14.79-11.78-18.35-20.60

-6.39-6.74-1.66

-10.54-12.27

-8.08-9.26-6.63-16.58-17.65

1.03-0.421.29

-5.44-4.09

7.001.854.530.310.73

6.963.776.074.105.69

-2.39-2.74-2.32

-13.44-14.14-13.98

-19.54-20.18-19.46

-11.96-12.55-11.72

-17.78-18.57-17.86

-4.89-4.33-5.64

0.821.230.29

4.183.934.11

1Month

3Months

6Months

2 3Years

5Years

1Year

9Months Years

Shreyash Devalkar

Karthikraj Lakshmanan

Shridatta Bhandwaldar

Anish Tawakley

Gaurav Misra

23


Value Fund/Contra Schemes

Fund Manager AUM(Rs in Cr.)

34094274726

24633763

Amit Ganatra

Taher Badshah

Shibani Kurian

Meenakshi Dawar

Vetri Subramaniam

HDFC Capital Builder Value Fund

Invesco India Contra Fund

Kotak India EQ Contra Fund

Nippon India Value Fund

UTI Value Opp Fund


NIFTY 500 - TRI

S&P BSE 200 - TRI

0.551.660.270.241.92

-16.91-13.90-16.99-18.04-14.98

-22.89-14.74-19.99-21.36-16.78

-16.23-6.31

-12.65-13.47-7.24

-26.74-14.08-18.01-22.57-13.92

-13.10-5.80-6.15-10.41-5.46

-4.362.201.25

-2.750.23

1.936.164.082.081.64

-2.39-2.31-2.32

-13.44-15.00-13.98

-19.54-19.93-19.46

-11.96-12.31-11.72

-17.78-19.17-17.86

-4.89-7.25-5.64

0.82-0.930.29

4.183.624.11


1Month

3Months

6Months

2 3Years

5Years

1Year

9Months Years

Mid Cap category Fund Manager AUM(Rs in Cr.)

5098648874759125701

Shreyash Devalkar

Vinit Sambre

Pranav Gokhale

Pankaj Tibrewal

Manish Gunwani

Axis Midcap Fund

DSP Midcap Fund

Invesco India Midcap Fund

Kotak Emerging Equity Fund

Nippon India Growth Fund

BenchmarkNifty Midcap 100 - TRI

S&P BSE Mid-Cap - TRI

-0.561.071.08-0.56-0.46

-13.03-14.49-16.56-20.70-22.27

-10.73-11.00-11.34-18.75-19.78

0.94-0.90-1.60-8.21-11.49

-2.80-7.58-9.71-16.14-19.63

0.81-5.30-4.62-9.48-9.48

8.19-0.231.16

-2.75-2.55

6.617.224.814.792.40

-1.70-1.34

-20.73-18.62

-22.58-21.04

-22.58-11.42

-25.18-20.49

-15.35-13.01

-7.89-5.79

1.283.23


1Month

3Months

6Months

2 3Years

5Years

1Year

9Months Years


MultiCap Category Fund Manager AUM(Rs in Cr.)


Canara Rob Equity Diver Fund

DSP Equity Fund

HDFC Equity Fund

Kotak Standard Multicap Fund

UTI Equity Fund


NIFTY 500 - TRI

S&P BSE 500 - TRI

18973151

18214260499193

-0.47-1.05-1.430.810.04

-13.61-18.78-17.72-15.87-16.60

-12.11-16.72-25.74-19.48-15.05

-2.89-7.46-19.20-11.07-4.47

-10.42-11.95

-28.00-18.15-10.59

-0.69-3.73-9.63-4.43-3.45

3.801.01

-4.15-0.223.07

5.095.271.315.514.37

-2.32-2.31-2.32

-14.26-15.00-14.74

-19.86-19.93-19.77

-12.25-12.31-12.14

-18.60-19.17-18.88

-6.13-7.25-7.14

-0.10-0.93-0.76

3.783.623.75

1Month

3Months

6Months

2 3Years

5Years

1Year

9Months Years


Atul Bhole

Prashant Jain

Harsha Upadhyaya

Ajay Tyagi

24 Returns as on 31st May 2020.


Focused Fund Fund Manager1

Month

AUM(Rs in Cr.) 3

Months6

Months2 3

Years5

Years

9493786

7968933

-1.96-1.26-1.290.27

-17.95-18.21-18.37-14.54

-18.00-15.60-17.11-17.25

-8.29-4.85-5.98-9.17

-11.69-9.31-13.19-13.64

-4.652.00-3.56-2.48

3.754.425.382.29

6.896.417.294.87

Jinesh Gopani

Mayur Patel

R. Srinivasan

Rahul Baijal

Axis Focused 25 Fund

IIFL Focused Equity Fund

SBI Focused Equity Fund

Sundaram Select Focus Fund

NIFTY 50 - TRI

S&P BSE 500 - TRI

-2.74-2.32

-14.14-14.74

-20.18-19.77

-12.55-12.14

-18.57-18.88

-4.33-7.14

1.23-0.76

3.933.75


1Year

9Months Years

Aggressive Hybrid Fund Fund Manager

1Month

AUM(Rs in Cr.) 3

Months6

Months2 3

Years5

Years

2912176963314

291061549

-0.133.49-0.44-0.590.13

-9.18-9.56-9.71-13.12-12.78

-7.53-14.73-13.63-13.59-13.81

0.28-7.06-6.43-5.73-6.19

-4.59-13.30-10.44-8.98-9.74

1.85-3.31-0.20-0.47-1.36

4.290.262.714.242.32

6.505.02

-5.625.09


Sankaran Naren

Neelesh Surana

R. Srinivasan

Rahul Baijal

Canara Rob Equity Hybrid Fund

ICICI Pru Equity & Debt Fund

Mirae Asset Hybrid Equity Fund

SBI Equity Hybrid Fund

Sundaram Equity Hybrid Fund

BenchmarkCRISIL Hybrid 35+65 - Aggressive Index -9.89 -27.95 -19.72 -4.77 -6.69 1.06 3.81 6.36


1Year

9Months Years


Small Cap Category Fund Manager AUM(Rs in Cr.)

2169982131869953280

Anupam Tiwari

Sankaran Naren

Pankaj Tibrewal

Samir Rachh

R. Srinivasan

Axis Small Cap Fund

ICICI Pru Small cap Fund

Kotak Small Cap Fund

Nippon India Small Cap Fund

SBI Small Cap Fund

BenchmarkNifty Smallcap 100 - TRI

Nifty Smallcap 250 - TRI

S&P BSE Small-Cap - TRI

-2.51-1.54-1.96-1.36-2.23

-23.93-29.49-25.01-21.46-19.72

-17.17-27.16-21.08-20.37-17.95

-9.56-20.78-11.86-12.13-8.98

-10.22-29.44-21.53-25.53-16.10

-2.94-17.79-15.07-16.91-11.39

2.64-9.99-7.31-5.451.32

6.22-2.871.924.878.07

-1.83-2.12-1.87

-29.18-26.40-20.23

-30.78-26.31-19.22

-25.87-20.27-12.33

-37.97-33.64-25.68

-27.63-24.09-19.66

-16.54-14.79-9.40

-5.20-2.890.25


1Month

3Months

6Months

2 3Years

5Years

1Year

9Months Years


Recommended Debt Funds

334182586045457260331348924454

4.584.314.584.344.264.07

4.56 5.48 5.48 5.54 6.02

5.314.975.255.235.004.94

5.685.805.805.756.025.51

5.435.515.455.435.575.28

5.905.875.835.895.875.75

4.934.634.834.764.594.73

43.8040.0046.8847.0044.0040.77

Aditya Birla SL Liquid Fund

Axis Liquid Fund

ICICI Pru Liquid Fund

Nippon India Liquid Fund

Tata Liquid Fund

UTI Liquid Cash Plan

Kaustubh Gupta

Devang Shah

Rahul Goswami

Anju Chhajer

Amit Somani

Amandeep Chopra

Liquid Schemes Fund Manager

Annualised Return (%)

BenchmarkCrisil Liquid Fund Index

AverageMaturityin Days1

Month2

Weeks

AUM(Rs in Cr.) 3

Months Months6 1

Year YTM

12268716747098925

15.2214.2612.2910.33

4.56 5.48 5.48 5.54 6.02

21.00 20.81 10.73 10.29 10.47

15.6514.0311.9111.57

7.748.778.687.92

7.067.127.156.85

7.857.477.647.53

6.666.655.575.96

270.10168.00163.00186.15

Aditya Birla SL Savings Fund

HDFC Ultra Short Term Fund

IDFC Ultra Short Term Fund

SBI Magnum Ultra Short Duration Fund

Kaustubh Gupta

Anil Bamboli

Harshal Joshi

Rajeev Radhakrishnan

Ultra Short Term Schemes Fund Manager



Crisil Short Term Bond Fund Index


Month2

Weeks

AUM(Rs in Cr.) 3

Months Months6 1

Year YTM


46251733940451493

15.7922.8110.9719.18

4.56 5.48 5.48 5.54 6.02

21.00 20.81 10.73 10.29 10.47

16.0920.5013.1018.56

8.528.018.199.09

7.377.487.177.60

8.318.448.018.43

6.267.235.726.01

376.00415.70434.00348.00

Devang Shah

Rahul Goswami

Anurag Mittal

Low Duration Schemes Fund Manager





Month2

Weeks

AUM(Rs in Cr.) 3

Months Months6 1

Year YTM

Axis Treasury Advantage Fund

ICICI Pru Savings Fund

IDFC Low Duration Fund

Invesco India Treasury Advantage Fund

SBI Magnum Low Duration Fund Rajeev Radhakrishnan 9019 13.65 14.84 8.78 7.25 8.08 6.45 357.70

Krishna Cheemalapati



1370913956552845174783

24.8729.0333.3526.9028.87

10.7320.81 10.29 10.47 8.17 8.38

11.2613.2310.0613.6210.98

9.0810.719.7710.7110.08

10.4511.6711.1211.7511.00

8.949.018.578.648.58

8.608.468.668.728.39

6.446.607.136.486.67

2.202.933.683.253.95

Axis Banking & PSU Debt Fund

IDFC Banking & PSU Debt Fund

Kotak Banking and PSU Debt Fund

Nippon India Banking & PSU Debt Fund

SBI Banking and PSU Fund

Aditya Pagaria

Anurag Mittal

Deepak Agrawal

Prashant Pimple


Banking & PSU Schemes Fund Manager

Annualised Return (%) CAGR Return (%)

Benchmark


AverageMaturityin Years3

Months1

Month

AUM(Rs in Cr.) 6

Months Year1 3

Years5

Years YTM

176481451811860140844032

24.7227.0426.0530.0319.52

10.7320.81 10.29 10.47 8.17 8.38

13.6112.5211.7912.939.23

11.1110.9010.0810.898.21

10.8011.1010.369.749.30

8.558.638.157.818.26

8.758.828.44

-8.38

6.896.917.136.816.7

4.453.783.373.741.49

Aditya Birla SL Corp Bond Fund

HDFC Corp Bond Fund

ICICI Pru Corp Bond Fund

IDFC Corp Bond Fund

Kotak Corporate Bond Fund

Maneesh Dangi

Anupam Joshi

Anuj Tagra

Anurag Mittal

Deepak Agrawal

Corporate BondSchemes Fund Manager


BenchmarkCrisil Short Term Bond Fund Index


Months1

Month

AUM(Rs in Cr.) 6

Months Year1 3

Years5

Years YTM

55601100011459992812716

23.6527.6225.2720.5022.12

10.7320.81 10.29 10.47 8.17 8.38

10.819.6711.529.9411.41

9.469.539.379.059.59

10.2810.4710.149.9210.43

7.998.308.037.747.81

8.168.388.057.998.10

7.047.816.736.926.69

2.903.362.282.733.41

Axis Short Term Fund

HDFC Short Term Debt Fund

IDFC Bond Fund - Short Term Plan

Kotak Bond Short Term Fund

SBI Short Term Debt Fund

Devang Shah

Anil Bamboli

Suyash Choudhary

Deepak Agrawal


Short Term Schemes Fund Manager


BenchmarkCrisil Short Term Bond Fund Index


Months1

Month

AUM(Rs in Cr.) 6

Months Year1 3

Years5

Years YTM

351103685812502433

26.2231.0128.8422.9530.04

16.9721.11 14.61 13.61 9.56 9.72

22.2522.4821.5918.4220.90

16.5418.3418.6715.9117.75

15.5417.0617.0115.3416.97

9.269.719.849.759.19

10.039.669.8810.239.92

6.616.376.486.196.33

11.5810.159.639.4712.42

Aditya Birla SL G-Sec Fund

DSP G-Sec Fund

IDFC G-Sec-Invest

Nippon India Gilt Securities Fund

SBI Magnum Gilt Fund

Pranay Sinha

Vikram Chopra

Suyash Choudhary

Hardik Shah

Dinesh Ahuja

Gilt Schemes Fund Manager


BenchmarkI-BEX (I-Sec Sovereign Bond Index)


Months1

Month

AUM(Rs in Cr.) 6

Months Year1 3

Years5

Years YTM

NAVIGATOR | VOLUME 1927 Returns as on 31st May 2020.



3254663

3076350

12043

11.9711.1911.3911.6512.35

2.281.81 4.11 4.45 5.04 5.54

6.427.347.836.346.82

6.467.127.176.376.61

6.286.806.766.276.33

6.416.726.706.326.37

6.366.576.566.126.43

6.166.376.356.026.32

6.20-

6.436.156.37

Aditya Birla SL Arbitrage FundBNP Paribas Arbitrage FundEdelweiss Arbitrage FundInvesco India Arbitrage FundKotak Equity Arbitrage Fund

Lovelish SolankiKarthikraj LakshmananBhavesh JainPranav GokhaleHiten Shah

Arbitrage Schemes Fund Manager


BenchmarkNifty 50 Arbitrage Index

3Months

1Month

AUM(Rs in Cr.) 6

Months9

Months Year1 2

Years3

Years5

Years

28101808766874254

2.992.702.752.84

5.483.00

4.562.89

5.483.13

5.544.00

6.024.72

3.132.872.922.99

3.183.023.083.19

3.983.843.923.97

4.664.554.624.65

3.893.663.533.60

4.003.003.651.00

Axis Overnight FundHDFC Overnight FundKotak Overnight FundUTI Overnight Fund

Aditya PagariaAnil BamboliDeepak AgrawalAmandeep Sing Chopra

Overnight Schemes Fund Manager


BenchmarkCrisil Liquid Fund IndexNifty 1D Rate Index


Months1

Month2

Week

AUM(Rs in Cr.) 6

Months Year1

YTM

82226575765641364370

15.8115.519.0811.4013.04

5.484.56 5.48 5.54 6.02

15.2415.729.7312.2013.25

9.7510.217.788.598.51

7.957.906.677.187.08

8.098.147.407.707.57

6.166.095.445.725.97

251.85289.00135.05168.00190.53

Aditya Birla SL Money Manager Fund

HDFC Money Market Fund

Kotak Money Market Fund

Nippon India Money Market Fund

UTI Money Market Fund

Kaustubh Gupta

Anil Bamboli

Deepak Agrawal

Anju Chhajer

Amandeep Chopra

Money Market Schemes Fund Manager



20.8121.00 10.73 10.29 10.47Crisil Short Term Bond Fund Index


Months1

Month2

Week

AUM(Rs in Cr.) 6

Months Year1

YTM


Emkay L.E.A.D PMS

Focus on riskadjusted

returns

Steady performanceover medium

term

Low portfolio turnover

Portfolio of 15 structural growth cos

No use of leverage orHigh debt cos

Lower portfolio volatility & high liquidity

FEATURESOF A L.E.A.D.PORTFOLIO

L.E.A.D. PMS – CORE INVESTMENT FRAMEWORK

LEADERSHIP• Market-share Leadership• Profit-share Leadership (Apple vs Rest of the manufacturers)• Cost Leadership (Export Oriented sectors like IT, Textiles, Chemicals)• Growth Leadership (Companies with best growth in the sector like Private banks vsPSUBanks)• Product Leadership

MOAT / NICHE IN THE BUSINESS• How different is the company• Edge, Entry-barrier, Competition, Pricing-power• Bargaining power of the indust

STRONG CREDENTIALS• Track record of past decisions• Comments v/s Delivery• Future-vision• Avoid aggressive accounting policies• Management background

DEPENDABLE• Identifying Price-Value gap with focus on margin of safety• Comparative valuations• Market-cap vs Opportunity size

STRONG EARNINGSVISIBILITY & QUALITY• How big the sector can be (3x, 4x....)• Revenue/PAT/ Cash-flow growth• RoE, RoCE analysis• High operating/Free cash-flow generation


EMKAY L.E.A.D PMS

FOCUS ON CAPITAL PRESERVATION

L.E.A.D. PMS – PERFORMANCE & PORTFOLIO TOP 5 HOLDINGS

RISK MANAGEMENT• >15% price movement in a month triggers review of the stock• Focus on Liquidity risk• No use of leverage• Monthly portfolio review

EARNINGS GROWTH AND QUALITY FILTERS• ROCE > COE• Earnings growth > GDP growth

FOCUS ON LARGE AND MID CAP COMPANIES• >50% exposure in companies with Mcap >USD 3bn• Nil exposure in small cap companies (Top 250 cos as per Mcap)• Companies with minimum turnover of INR 500cr

Strong Riskmanagement strategy with

focus onCapital

PreservationDIVERSIFICATION ACROSSINDUSTRIES AND COMPANIES• < 30%* exposure in one sector• <10%* exposure in one stock• Maximum investment in 15 stocks• <20%* exposure in turn arounds or special situation stocks *At the time of initiation

Top 5 Holdings

Total

Holding (%)Company

9.239.199.108.927.88

44.32

Avenue Supermarts Ltd.Pidilite Industries Ltd.Berger Paints Ltd.Aarti Industires Ltd.Whirlpool India Ltd.

Performance in %

Returns as on 31st May 2020. *Inception Date 1st November 2018

1Month

3Months

6Months

L.E.A.D

Nifty 200

9Months

SinceInception*

-3.70

-2.40

-17.00

-14.60

-14.80

-20.20

-5.00

-12.8

1Year

-8.60

-19.70

5.80

-6.30


PMS Products Update

Investment strategy:

IIFL MULTICAP PMS

Investment Strategy

Identify businesses with competitive advantage that are significant sized (min Rs. 100cr of PBT) but not a large part of the opportunity. Enables growth from both market share gains and growth of the opportunity size and can sustain for multiple years.

The quality of the business should be good to be able to fund strong growth through internal cash generation.

The management should have the drive and have skin in the game to deliver compounded growth, period after period (uncompromised corporate governance is a must).

It seeks to identify such businesses at reasonable discount to value and stay invested for a length of time and make money as EPS compounds.

ASK INDIAN ENTREPRENEUR PORTFOLIO

Identify large and growing business opportunities.

Performance in %

3 Month 1 Year1 Month 2 YearCAGR

IEP

BSE 500

Nifty

6 Month 3 YearCAGR

5 YearCAGR

SinceInception

CAGR*

**Inception Date 1st April 2013. Return as on 31st May. 2020

-4.90

-2.40

-2.80

-21.00

-15.10

-14.50

-19.20

-20.30

-20.50

-15.10

-20.00

-19.60

-6.70

-8.30

-5.50

1.80

-2.00

-0.10

5.40

2.40

2.60

15.20

6.20

6.50


The investment strategy is to invest in companies and sectors that are available at significant discount to their intrinsic value and provide earnings visibility.The strategy takes a concentrated position in stocks and sectors and endeavours to strategically change allocation between sectors depending on changes in the business cycle.The investment decisions are taken based on SCDV framework that has 4 quadrants to it, namely:

Cyclical growth (PAT>15%, ROE <15%): Companies/Sectors that show high growth but are affected by market cycles and hence need to be timed for entry and exit.Secular (PAT>15%, ROE >15%): High growth companies/sectors which show consistent growth across market cycles.Defensive (PAT<15%, ROE >15%): Companies/sectors that show consistent stable growth across market cycles.Value Trap (PAT<15%, ROE <15%): Companies/sectors that are at attractive valuation but do not show commensurate growth.

3 Month 1 Year1 Month 2 YearCAGR

IIFL Multicap PMS

S&P BSE 200 TRI

6 Month 3 YearCAGR

5 YearCAGR

SinceInception

CAGR*

**Inception Date 1st April 2013. Return as on 31st May. 2020

-3.45

-2.32

-22.12

-13.98

-19.18

-19.46

-13.89

-17.86

0.85

-5.64

4.66

0.29

11.77

4.11

12.49

4.43

31

Emkay Capital Builder PMSEmkay Capital Builder PMS Strategy

Fund Management TeamSachin Shah - Fund Manager

Emkay Investment Managers Ltd is a SEBI registered PMS service provider with overallPMStrack record of over 10 years.

Emkay Capital Builder allows complete flexibility in selection of stocks across market capitalization.

Capital preservation and appreciation over-time through an “absolute returns” approach.

Investing in sectors and companies expect-ed to benefit from the fast-paced growth of the Indian economy and having a competi-tive advantage with a significant size that will benefit both from market share gains and growth of the opportunity size.

Mr. Shah is Chatered FinancialAnalyst and has 18 years of experience in the Portfolio Manage-ment space with Emkay. He has provided valuable inputs in the establishment of a well-documented investment process E-QUAL Risk (Emkay Proprietary Model) - a key factor behind our splendid performance.

Our unique proprietary process seeks to differentiate business on basis of manage-ment capability, integrity and skin in the game to deliver growth over-time.

Strategy consistently seeks to identify suchbusiness where intrinsic value of the busi-ness is good and the price is reasonable.

Focused portfolio with no over-diversifiction.

Capital Builder Benchmark - Nifty 500.

Returns as on 31st May 2020. *Inception Date 1st April 2013

Performance in %

FY 14 FY 15 FY 16 FY 17

24.10

17.70

6.40

52.7

33.6

20.2

-3.8

-7.5

3.1

25.1

23.9

1.2

10.3

11.5

-1.2

0.9

8.4

-7.5

10.96

11.80

-1.16

-31.7

-27.6

-4.1

9.85

8.23

1.62

Emkay PMS(Model Client)

NIFTY 500

Outperformance

Benchmark

SinceInception

CAGR*FY 18 FY 19 FY 20 FY 20 YTD

ABSOLUTERETURNFOCUS

Top 10 Stock Holding

Holding (%)Company

15.1511.387.177.156.696.265.434.734.073.8371.86

Divi's Laboratories Limited

ICICI Bank Ltd.

Sun Pharmaceutical Ltd.

HDFC Bank Ltd

Nesco Ltd

Reliance Industries Ltd.

Sundram Fasteners Ltd.

Eicher Motors Ltd

Bharti Airtel Ltd

Mahindra Holidays & Resorts India Ltd

Total

Avoid capital loss over client's

investment horizon

of 2-3 years

STRICTPURCHASE

PRICEDISCIPLINEGet client into a "positive cycle" at the time of investing to

ensure achievementof "Absolute

Returns”

NO MODEL

PORTFOLIOPatience not

just afterinvesting but even before

investing

Emkay PMS Guiding principles




Estate and succession planning is the process of anticipating and arranging for the disposal of estate during and after one's lifetime. In absence of a succession plan, the assets of the deceased would be distributed as per the applicable religious laws amongst the legal heirs.

1. DraftingWill:Will is a legal document that comes in play on the demise of the testator. It carries the wishes of an individual regarding distribution of his/her estate.

2. Gifts during lifetime:Gift is transfer of movable or immovable property, made voluntarily, during one's lifetime and without consideration, by the donor and accepted by donee. If the gift is received from any blood relative, it will not be taxable.

4. Charitable Trust :CharitableTrust is setup for philanthropy aspirations for the benefit of public at large. It enjoys income tax benefit on the income of the trust and tax benefit to the donors on the donation made by them.

5. Family Business Succession:Family business succession is the process of transitioning the management and the ownership of the business to next generation of family members. The family component plays a crucial role here and needs to be effectively integrated in the transition process.

6. Obtaining Probate/Succession Certificate:Probate establishes the validity of a Will in Court. In absence of a Will, a succession certificate is required to be obtained from the Court for transferring the assets of a deceased.

3. Formation of Private Trust:A Trust is a relationship whereby property is transferred by one party(Settlor) to be held and managed by another party(Trustees) for the benefit of third party (Beneficiaries), governed by the Indian Trust Act, 1882. Some of the advantages of a PrivateTrust are:• Multi-generation succession and provision for wishes beyond lifetime of Settlor• Trust can be structured to control the timing and amount of distributions• Provide for dependent relatives and to provide for ongoing financial management• Protection of assets from outside claims and from disputes within the family• To hold the shares of company for business continuity & for delinking ownership from management• Avoids probate• Privacy protection• Inheritance tax planning and avoid forced heirship rules for NRIs

Who needs Estate Planning?∙ Joint Family

∙ Businessmen

∙ Multiple marriages

∙ NRI family members

∙ Inheritance tax planning

∙ Nuclear Family

∙ Professionals

∙ Asset Protection needs

∙ Family with special children

∙ Family with no legal heir

For any queries or assistance kindly contact us at [email protected]


HUF and Transfer of AssetsHindu Undivided Family (HUF), as the name suggests, is a joint or undivided family which is seen as a separate entity from that of the individual members in the HUF. Hindu, Jain, Buddhist and Sikh families can form HUFs. HUF is a family which consists of all persons lineally descended from a common ancestor and it also includes the wives and daughters of the male descendant. It consists of the Karta, who is typically the eldest person or head of the family, while others are coparceners and members of HUF. The Karta manages the day-to-day affairs of the HUF. Children are coparceners of their father’s HUF. Once a daughter gets married, she becomes a member of her husband’s HUF, while continuing to be a coparcener of her father’s HUF.

HUF usually has assets which come from a gift, a will, ancestral property, or property acquired from the sale of joint family property or property contributed to the common pool by members of HUF.

Under section 2(31) of the Income-tax Act, 1961, an HUF is considered a ‘person’ and therefore, is treated as a separate entity for the purpose of tax assessment. Often families that own ancestral properties and businesses obtain a separate Permanent Account Number (PAN) in the name of the HUF. This is done so that the income earned from the assets and businesses owned by the HUF are assessed separately, which also brings down the family’s tax liability. HUF is taxed on the same slab rates that are applicable to an individual income tax assessee.

A person becomes coparcener by birth and acquires interest in the HUF property. An adopted child also becomes coparcener of the HUF. The share of a coparcener may increase or decrease depending upon the number of births and deaths in the family. Upon marriage, a wife becomes a member of her husband’s HUF. It is also to be noted that members are different from coparceners and members cannot demand partition in the HUF property but have a share in the HUF property as and when the partition takes place. For example, if a family consists of father as Karta, his wife and three children i.e. two son and one daughter. In this case, the father and his three children are coparceners and the wife of Karta is a member of the HUF.

COPARCENER AND MEMBER OF HUF

HUF is purely a creation of law and cannot be created by an act of parties (except in case of adoption and marriage). Family is a group of people and a single person, male or female, does not constitute a family. Hence, a single person cannot create HUF. As soon as a person gets married, HUF gets created automatically. But to be recorded by tax authorities, it needs to have an income-generating asset, which can come as a gift from a relative or through a will or through ancestral property. Once it has such an asset, the HUF needs to be registered with a name and other formalities such as acquiring a Permanent Account Number (PAN), opening a bank account, etc. must be completed.

CREATION OF HUF

Section 6 of the Hindu Succession Act, 1956, which deals with coparcener’s right in the HUF property, was amended in 2005 w.e.f. September 9, 2005. With this amendment, daughters have been put at par with sons, as far as coparcenary rights in HUF property are concerned.Prior to the Hindu Succession (Amendment) Act 2005, only male members descended from a common ancestor such as sons, grandsons and great grandsons could be coparceners in HUF property

LEGAL RIGHTS OF DAUGHTERS IN HUF PROPERTY


Coparceners or members of the HUF are treated as relative of the HUF, the gift of their individual property to the HUF will not be taxable under Section 56(2) at the time of receipt of the gift. From an income tax perspective, capital gain is triggered only when there is a taxable transfer. Here, gift by any member or coparcener of HUF is a non-taxable transfer to the HUF and it will not trigger capital gains tax. But gifts received from non-members shall become fully taxable if the aggregate of all gifts received by the HUF during the year exceeds ₹50,000/-. However, gifts up to ₹50,000 in a year received by HUF from non-members are fully exempt under Section 56(2).

It is also to be noted that a gift given by HUF to its coparcener or member with the consent of all the other members of HUF, is not taxable under section 56(2) of IT Act 1961 as held in DCIT vs. Ateev V. Gala (ITAT Mumbai).

In case of gifts through cheque or movable assets, no registration is required to be done but in case of gifts of immovable property such gift needs to be registered and adequate stamp duty is also required to be paid. Stamp duty on gift deed varies from state to state.

GIFT RECEIVED BY HUF THROUGH ITS MEMBERS OR COPARCENERS

It is to be noted that HUF property can be given through a will. If a coparcener wants to bequeath his undivided share in HUF property in favour of other members or coparceners, then he can do so by executing his Will and bequeathing his share.

HUF PROPERTY INHERITED THROUGH A WILL

PARTITION OF HUF ASSETS

and have an interest by birth in coparcenary or HUF property and daughters did not have a right to HUF property. Daughters, being a member of HUF, could only ask for maintenance from joint Hindu family and they ceased to be a member of HUF after their marriage. However, now, by virtue of the Hindu Succession (Amendment) Act 2005, daughters are also coparceners, in the same manner as sons. However, for a daughter to be a coparcener, both she and her father should have been alive on 9 September 2005 as per the judgement of the Supreme Court in Prakash & Ors. vs. Phulavati & Ors. In case the father passed away prior to this date, regardless of the daughter being alive on this date, the daughter will not get the benefit of this amendment and will, therefore, have no rights over the property. In such a case, the ancestral property would devolve only upon the male coparceners of the Hindu Undivided Family (HUF).

HUF and Transfer of Assets

To transfer immovable assets through partition, one needs to prepare a partition deed. On partition between father and children, the father and children get an equal share ‘per stirpes’. Per stirpes means that each branch of the family will receive an equal share of the property. Grandchildren also become coparcener on birth and have a right to the property where grandchildren get a share in their respective parent’s share. For example, if a family consists of five members such as husband and wife having three children. The HUF property would be divided into five shares, the husband and the wife each taking one share and the remaining three shares devolving upon each child equally. Hence, each person will receive 1/5th share in the property. If a child has demised then the share of the pre-de-ceased child, as they would have got had they been alive at the time of partition, shall be allotted to



the surviving children of such pre-deceased child.

As we know, all the coparceners have a right in the assets of the HUF, so the Karta cannot disentitle any coparcener of his right. In case the coparcener demands partition of the HUF’s assets, the Karta must give the coparcener his share from the assets of the HUF. Though, as per the Hindu Law, part distribution of some of the assets of the HUF, which is called as partial partition of the HUF, either in respect of certain and not all assets or in respect of some of the members is fully valid. However, in view of provisions of S.171(9) of Income-tax Act, 1961, partial partitions will not be recognised for tax purposes. The income tax laws require that partition of HUF should be full.

An instrument of partition, of immovable property, of the value of ₹100 or upward requires registration. As held by the Supreme Court in Ramnagina vs. Harihar, a partition of immovable properties between coparceners or co-owners can be made orally, and is not required to be in writing; but, if there is an instrument effecting partition of immovable properties, it requires registration. Partition deed attracts stamp duty and must be registered. Stamp duty on partition deed varies from state to state.

Family settlements/arrangements are also effective for the distribution of ancestral property. The object of the family settlement should be broadly to settle existing or future disputes regarding prop-erty, amongst the members of the family. The family arrangement must be bonafide, honest, volun-tary and it should not be induced by fraud, coercion, or undue influence. In, Partap Singh & Anr. vs. Sant Palani Pillai vs. Sengamalathachi & Ors., the Supreme court has held that a minor cannot disturb a family settlement made in good faith unless he or she makes out a case in fraud.

The Supreme Court has clearly laid down in Roshan Singh vs. Zail Singh, that, if the family arrange-ment is of such nature, where one person transfers his right in the property to the other and the other person derives title of property through such an arrangement, then the family arrangement is required to be registered and duly stamped.

FAMILY ARRANGEMENT/SETTLEMENT

Release deed is a legal document/instrument where a legal heir gives up or releases his legal rights in an inherited property in favour of other legal heirs such as his mother, son, daughter, brother, sister, etc.

The term release refers to the abandoning and surrender of the rights, title, and interest, by one co-owner of property in favour of other co-owners. Hence, if a legal heir chooses to give up rights in the inheritance, he or she will have to execute a ‘deed of release' in favor of other heirs, stating that they are giving up their claim in the said property and in such a case, the children of this person will also not be able to stake claim over the property in future. The Bombay High Court in the case of Raivathari Madhupati Singhania vs. Madhupati Vijaypath Singhania, dismissed the plea filed by grandchildren of Mr. Vijaypath Singhania. The grandchildren have challenged a 1998 settlement agreement through which Mr. Madhupati and his family had relinquished their share in the property. The grandchildren have alleged that the settlement agreement ignored their rights as minors, but High Court dismissed all the claims of grandchildren and refused them a share in the property which

RELEASE DEED



HUF is an ever-increasing entity as members keep getting added or reduced. In such a scenario, managing the family and its finances might get quite complex. Though creating and registering an HUF is fairly easy, complications may arise later. At the root of many problems is poor understanding of the laws that govern HUFs. HUF laws are not codified and are read along with the Hindu Succession Act and the Income-tax Act. We have also interpreted the law through various judicial pronounce-ments which makes it quite easy to understand HUF laws and its implication. Hence, we can conclude by saying that each member has an equal right to the property owned by HUF which implies that the share of the existing members keeps diluting with new additions or increases on demise of any member. While all goes well till there are no disagreements among members, matters might go out of hand in case any discontent arises.

CONCLUSION

was relinquished by their father.

A deed of release is required to be duly stamped and registered. Stamp duty varies from state to state.


Notes


ModelPortfolio

Conservative Aggressive

Liquid FundsFixed depositsBonds/Tax FreesUST/Low Duration/ArbitrageFMPs/Interval Funds

30% 30% 10% 10% 15% 0%

Emkay Wealth Emkay Wealth Emkay Wealth Emkay Wealth Emkay Wealth Emkay WealthGUARD CONSERVE STEADY BUILD GROW MULTIPLY

Investor SuitabilityI . Debt - Short Term

II . Debt-Long Term

III. Equity

Short Term FundsIncome FundsCredit Risk FundsGilt Funds

Equity FundsDirect EquityPMSPrivate EquityIV. Alternate AssetsGold ETF/FundsReal Estate Products/REITSStructured ProductsI+II+III+IV 100% 100% 100% 100% 100% 100%

0% 0% 0% 0% 5% 20%

0% 10% 40% 60% 70% 80%

70% 60% 50% 30% 10% 0%

Guard - This is the most conservative of the model portfolios. The primary objective of this portfolio is preservation of capital. From a near to medium term perspective the portfolio construction aims at reducing the probability of losses, thereby there is no equity allocation in this portfolio.

Grow - The portfolio is suitable for aggressive investors with primary investment objective of capital growth. The major part of the portfolio is maintained in equity asset class. To provide stability to returns and to manage liquidity requirements effectively, a portion of the portfolio is maintained in debt asset class.

Multiply - The portfolio is suitable for aggressive inves-tors in the “Accumulation Phase”. With minimal liquidity requirements, the entire portfolio is allocated in high return generating assets. In order to reduce the risks associated with asset class concentration, Alternate Assets are introduced in the portfolio, so as to reduce the overall risk without compromising on the return generating potential.

Conserve - The primary objective continues to be capital preservation, but with marginally enhanced return generating potential. With an endeavour to earn better returns as compared to a pure debt portfolio, equity asset class allocation is introduced.

Steady - This portfolio is suitable for moderately aggres-sive investors, aiming to earn higher returns on their investments but at the same time do not intend to expose entire portfolio to the volatility of asset classes with high return generating potential. The allocation to equity asset class goes up, whilst the tilt remains in favour of debt.

Build - The allocation to equity asset class is further enhanced as the primary investment objective moves towards capital growth rather than preservation of capital over the near term. As the equity allocation goes

up, so does the investment horizon. A healthy exposure to debt asset class is also maintained to reduce the overall volatility of returns.


Published by Mr. Amit Rawal - Research Division Emkay Wealth Management.For content related queries contact at [email protected]

The information published is as per the data provided by various Mutual Funds, PMS Portfolio Man-agers, ProductManufacturers and segregated, consolidated and presented (statistically) by and on behalf of Emkay Wealth Management (EWM) which is involved in distribution of third party financial products. Though sufficient care has been taken to provide the correct data, EWM does not guaran-tee the accuracy of the data provided herein. As a potential investor, you are advised to check the updated data and other Terms & Conditions on the manufacturer’s website before making any investments. This report is disseminated for the information of authorized recipients only and is not to be relied upon or taken as substitution for the exercise of due diligence and judgment by any recipient. This report does not provide individually tailored investment advice; investor should seek independent financial advice with respect to the merits and risks involved in any of the matters con-cerning investment in the schemes / products mentioned in the report. Any person investing on the basis of the data published in Navigator will be doing so at their own risk and are advised to consult their certified financial planner before taking any investment decision. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Disclaimer


LEADERSHIP PROFILE

An alumni of Columbia Business School and NMIMS, Bhavesh brings in nearly three decades of experience, of which, the last 16 years are with the Financial Services industry. Throughout his career, he has been known for building, leading and motivating teams to excel in highly demanding and dynamic business environments. At Emkay he puts to good use his entrepreneurial drive combined with business-manage-ment skills to drive gains in revenue, market share and profit performance.

Bhavesh Sanghvi, CEO

A Masters in Economics and a Ph.D in Management, Dr. Thomas brings to the table a rich experience spanning three decades. His views on the economy, markets, portfolios and financial products are highly appreciated and pursued. He is a visiting faculty at numerous management and professional institutes and has also presented research papers at national and international conferences.

Joseph Thomas, Head of Research

An alumni of Columbia Business School, a Masters in Management from JBIMS and an Engineer from VJTI, Mumbai, Ashish brings in over 25 years of experience in financial services and investment management. He has been a fund manager for various funds, ranging from private equity, fixed income and hybrid to Equity.As a CIO and Head of PMS and Offshore Funds in his previous stints, he has lead teams and built assets across products. He brings in a rich experience and product knowledge to the team and his process oriented approach and Institutional background are an asset to our Institutional and high net-worth clients.

Ashish Ranawade, Head of Products

Apost graduate in Finance from Pune University, Parag holds over 21 years of experience in the financial services industry. He is renowned in the industry for his astute leadership skills and has been extremely successful in building teams during his earlier stints. At Emkay he will be driving the entire sales function of the division and setting out quality standards for various operational areas, implementing quality systems and procedures to facilitate a high quality customer experience.

Parag Morey, Head of Sales

With a Masters in Finance & Marketing and several leadership programs from IIM-A & ISB Hyderabad, Ashish comes with over a decade of experience in the Wealth Management space. His core competencies include strategy and alliances, negotiations and relationship management, business development, customer relationship management and customer engagement.

Ashish Todi, Head of Strategy & New Initiatives

A lawyer and a Company Secretary, Namita comes with a decade of experience in succession planning. She provides specialized and personal advice to families, business houses and high net worth individuals having wealth across various asset classes, geographies and complex business structures, keeping in mind the religious laws applicable in India, the succession laws for each class of assets and cross border succession laws.

Namita Agarwal, AVP Succession Planning

Amanagement graduate from Mumbai University, Raj comes with over a decade of experience in the Indian equity market. As an equity strategist he is an expert at managing equity advisory (PMS/ ND-PMS/ Direct Equities) for wealth clients. In his past assignments he has also worked as a senior equity analyst tracking multiple sectors and managing event based trading strategies. He is part of the Investment Managers team.

Raj Gala, Sr. Portfolio Manager


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