TREASURE OF KNOWLEDGE · cycle to resume in private investment programmes. On the positive side,...

WEALTHMANAGEMENT

GROUP

KNOWLED GETREASURE OF

Q u a r t e r l y R e v i e w f o r W e a l t h M a n a g e m e n t C l i e n t s

Dear Sir / Madam,

Greetings!

Post the January 2018 global market rise, wherein Indian Markets too participated, it has been a highly volatile period.

Markets corrected almost 10% from its January 2018 peak and very quickly have regained 80% of the lost ground with Nifty

ruling around 10900.

During these four months, Oil has crossed $70/bbl mark and US 10 Year GSec almost 3% mark and USD/INR breaching `

67/$1. On the other side, we have seen fourth quarter corporate earnings which has been below expectation, largely due

to margin compression caused by higher commodity prices, interest cost and banks weak asset quality.

In the last quarter, we had suggested our clients to use dips near 10000 Nifty level to add to the equity allocation. Equity

Markets truly did give such opportunities and we continue to have a similar view.

At the current juncture, we seriously feel a bottom up approach of stock picking makes sense through select PMS

offerings. While on broader markets, Nifty above 11300 invites partial profit booking.

Domestic Interest rates continue to remain elevated with oil close to $70/bbl, Currency depreciation fueling fear of

higher inflation in the 2nd half of 2018. With monsoon around the corner, in our view, clients should remain invested at

the shorter end of the curve through combination of corporate bond and credit funds. However, if Indian 10 Year Gsec

breaches 8% level, one should start building position in duration in a calibrated manner.

Regards

Vipul Shah

Managing Director & Co-Head, Wealth

Vipul ShahManaging Director, & Co-Head, Wealth

The tumultuous last few months have characterized global markets along with a similar trajectory in India. US President

Trump’s bombasts on global trade as well as the Iran Nuclear deal underpins much of this. While US 10-year bond yields

are also close to 3%, another important milestone as we move towards a world of firmer interest rates. The recent move in

the USD against a basket of emerging currencies has also seen INR depreciation move towards ̀ 67/$1. Subsequently, the

Indian 10-year GSec is now also near a yield of 7.7%. The main NIFTY index although up +2.7% YTD in rupee terms is down -

2.4% in USD terms over the same period. Notwithstanding this, we continue to witness strong equity flows; domestic flows

of $ 6.9 billion YTD, while FII flows albeit lower at $1.3 billion YTD.

More worrying near terms concerns are that the Macro’s continue to weaken. Brent crude has crossed $70/bbl and is still

rising. Additionally, a basket of commodity & metals prices also continues to remain hard. This is expected to add to

inflationary pressures as we head into the 2HFY2019 and consequently will have a negative impact on margins and pricing

power for a variety of sectors.

Continued and fresh NPA clean-up at the banks is beginning to test patience of investors as we continue to hear a repeat

cycle of “the worst is over”. This process is also a drag on credit growth picking up along with implications for a new Capex

cycle to resume in private investment programmes. On the positive side, there are pockets of growth emerging,

especially in consumption related sectors and further stability in the rural economy. This is being borne out by the 4Q2018

results reported so far.

To that extent, earnings trajectory will be closely watched in 2018 and going into 2019. So far, the latest Q4 FY2018

results are encouraging, although signs of margin pressure are there. The revival in earnings is critical for stretched

valuations to sustain. After the strong market gains in 2018, particularly in the mid and small caps segment, it is very

important to keep an eye on valuations. With little scope of valuation re-rating, bulk of the returns are likely to be guided

mainly by earnings growth.

With is in mind the 2H of FY2019 will be critical in terms of how this earnings growth pans out in the backdrop of high

commodity prices and rising inflation pressures. Politics will also play on the market in the next 12 months due to various

state elections and the impending General election in 2019, further adding to the volatility.

Going into FY2019, as aggregate profitability still continues to improve with earnings catching up, we expect Corporate

India to return to normal levels of growth and profitability towards FY2020. We continue to believe, this is a good time

for investors to increase their allocation to equities from a 2-3 year perspective. Overall, India’s economy continues

to grow better than global averages and the benefits of focused structural reforms will also play out.

Regards

Rakesh Parekh

Managing Director – Portfolio Management and Research

Rakesh ParekhManaging Director –

Portfolio Management and Research

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Section I – Global Market Overview

Section II - Domestic Market Overview

Section III - Debt Market Overview

Section IV – Commodities and Currency Overview

Section V – Ideas of the recent past

Section VI - Product Opportunity

• Financial markets turned volatile during the quarter,

triggered by uncertainty regarding the pace of

normalization of US monetary policy, and concerns

surrounding global trade. Equity markets globally have

shed most of the gains of the previous quarter in a

heavy sell off in February-March, caused by optimistic

US job reports and the US imposition of new tariffs on

Chinese goods. Yields in the US hardened amidst the

anticipated rate hike by the Fed. Yields among EMEs,

they have remained divergent on country-specific

factors.

• During the quarter, global economic activity gathered

momentum, both in advanced and emerging market

economies, though financial market volatility and

potential trade wars pose a threat to the outlook.

Among advanced economies (Aes),

a. The US economy, which ended 2017 on a slightly

weak note, appeared to have bounced back in

Q1:2018; the unemployment rate remains low with

hiring around multi-month highs.

b. In the Euro Area, economic activity remained

buoyant, although consumer spending and factory

activity slowed down due to the strengthening of

the euro, but a consistently falling unemployment

rate and elevated consumer confidence continued

to underpin the strength of the economy.

c. The Japanese economy registered eight straight

quarters of growth till Q4:2017; available data for

2018 point to a slower start to the year with weak

machinery orders and an easing manufacturing

Purchasing Manager's Index (PMI) in February-

March.

• Economic activity remained robust in emerging

market economies (EMEs) in Q1:2018.

a. The Chinese economy started the year on a strong

note; retail sales picked up pace indicating robust

consumption, while industrial production also

registered a strong increase in Q1:2018 on improved

mining and manufacturing activity.

b. In Brazil, economic activity is gaining momentum,

driven by higher commodity prices.

c. The Russian economy continued to recover in Q1;

industrial production expanded in January-

February, after two months of contraction, while

exports grew at a robust pace.

d. In South Africa, leading indicators, viz., the

manufacturing PMI and business confidence,

improved in Q1.

• The IMF upgraded the US growth projection for 2018

and 2019 to 2.9% and 2.7%, respectively on the back of

benefits of tax cuts passed in December 2017 as well as

a $1.3 trillion spending bill. The US Federal Reserve

kept its benchmark interest rate unchanged in its May

2018 policy meeting and also noted that inflation is

nearing its 2% target rate.

• The latest communication by the US central bank

signaled a more gradual rate tightening path and hopes

of a better global growth and earnings have lifted

appetite for risk assets. On the other hand, the higher

commodities prices and improving growth outlook has

led to US 10 year touching 3% mark. The combination of

rising trade friction & sanctions, growing geo-politcal

tensions, rising yields, and appreciating dollar, could

have impact on capital flows into EM.

• ECB in its monetary policy review kept interest rates

unchanged and is expected to remain same for an

extended period. The bank further stated that net

asset purchases will remain at the existing rate of EUR

30 billion until the end of Sep 2018, or beyond, if

necessary. ECB Chief acknowledged some moderation

in the Eurozone economy but added that growth is

expected to remain solid and broad-based.

• BoJ kept its monetary stimulus unchanged and decided

to hold its target of raising the amount of outstanding

Japanese Government Bonds (JGB) holdings at an

annual pace of about JPY 80 trillion. The bank stated

that it will purchase government bonds so that the

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yield of 10-year JGBs will remain at approximately 0%.

The board decided to maintain the -0.1% interest rate

on current accounts that financial institutions

maintain at the bank. With regards to outlook, Japan's

economy is likely to continue its moderate expansion.

• Increasingly, the reduction in Fed balance sheet and its

impact on the credit markets will also be a critical

factor to monitor, as this factor can have impact on the

economic activity.

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• Equity markets exhibited heightened volatility during

the quarter with Sensex / Nifty down by 2.2% / 2.6%,

a. Due to factors like budget introducing LTCG on

equity, increasing NPA stress in banking system &

news flow over banking frauds, vigilant RBI, FII

outflows (`5,586 crores in the quarter), INR

depreciation and rising oil prices impacting CAD.

b. On the other externally, Fed rate hikes & rising

global bond yields, rising trade tensions, and dollar

appreciation have added to woes.

c. However, domestic flows continued to be strong

primarily driven by Mutual Fund (MFs) flows. The

MFs infused around `36,380 crores during the

quarter ending April’18 while monthly SIP have

crossed ̀ 7000 crores.

• In the first monetary policy meeting for FY2019,

a. RBI has downwardly revised its inflation

projections made in February '18 for a) 4QFY2018

from 5.1% YoY to 4.5% b) 1HFY2019 from 5.1-5.6% to

4.7-5.1%, and c) 2HFY2019 from 4.5-4.6% to 4.4%.

b. RBI has projected growth in FY2019 at 7.4% YoY vs.

6.6% in FY2018. The range forecasted for a)

1HFY2019 stands at 7.3-7.4% (vs. 7.4-7.5%

estimated earlier) and b) for 2HFY2019 at 7.3-7.6%

(vs. 7.3-7.4% earlier).

• The minutes of the first monetary policy committee

revealed that Dr. Patra was the sole member to vote for

a 25bps hike in policy repo rate (vs. status quo by other

members) due to expectations of monotonically rising

inflation trend (ex-fuel, food and statistical

component of HRA), against strengthening growth

impulses. Also, one of the members indicated towards

removal of monetary accommodative stance. Some of

these indicators distorted the bond market

expectations as RBI has lowered the inflation

projection in its policy and highlighted the need for

nurturing the nascent growth recovery.

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• RBI has scrapped several loan restructuring

programmes prevalent among banks to restructure

defaulted loans. Almost all the schemes such as the

Corporate Debt Restructuring, Sustainable Structuring

of Stressed Assets or S4A, Strategic Debt

Restructuring, and Flexible Structuring of Existing

Long-Term Project Loans have been abolished by RBI.

Also, RBI has made resolution of defaults time bound

with the Insolvency and Bankruptcy Code becoming

the main tool to deal with defaulters. Also, the central

bank has warned banks of monetary penalties and

higher provisions if banks are found to have violated or

found 'evergreening' accounts to escape its stringent

new norms on fixing defaults

• GDP grew 7.2% YoY in the third quarter of FY2018,

better than upwardly revised growth of 6.5% (6.3%

originally reported) in the previous quarter driven by

pick up in manufacturing and spending. On Gross Value

Added (GVA) basis, the economy rose 6.7%, better than

upwardly revised growth of 6.2% (6.1% originally

reported) rise in the quarter ended Sep 2017.

• India's fiscal deficit during April and January 2018 stood

at ` 6.77 lakh crore or 113.7% of the budgeted target

for FY2018. During the corresponding period last year,

fiscal deficit was at 105.6% of the Budget Estimate.

Total receipts were ` 11.63 lakh crore or 71.7% of the

Budget Estimate, while revenue expenditure

amounted to ̀ 15.76 lakh crore or 81.0% of the financial

year estimates.

• CAD increased to $13.5 billion (2% of GDP) in Q3FY2018

vs. $ 8 billion (1.4% of GDP) in 3QY2017 and $7.2 billion

(1.1% of GDP) in 2QFY2018. This was mainly due to

higher goods deficit ($ 44 billion). Net services receipts

expanded 18% YoY.

• Data released by the EPFO and PFRDA shows that

during September '17 to February '18, 3.5 million new

payrolls were generated across all age groups.

• IMD expects 97% normal monsoon for 2018-19.

According to IMD, this is expected to be the third year

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in a row with very low chances of rain deficit. The

announcement is positive for the rural economy.

• IMF maintained its growth projections for the Indian

economy at 7.4% for 2018 and 7.8% for 2019.

a. This is higher than that of China for which IMF

projected a growth of 6.6% in 2018 and 6.4% in

2019.

b. According to IMF, structural reforms, pick up in

private investments, implementation of the Goods

and Services Tax (GST) and fading impact of

demonetization will lend support to the growth

prospects of the domestic economy.

c. However, IMF expressed concerns regarding

corporate debt overhang and bad loans in the

banking sector.

• Trade deficit for March '18 widened to USD 13.7 billion

vs. USD 12.0 billion in February '18, due to relatively

stronger growth in imports (13.2% MoM; 7.2% YoY) vs.

slower exports (12.9% MoM; -0.6% YoY). The trade

deficit for FY18 has closed at USD 157 billion (vs. USD

109 billion last year), with import growth (19.6% YoY)

almost 2x of export growth (9.9% YoY)

• Domestic sales of two-wheelers, passenger vehicles

for March '18 exhibited robust growth of 18% and 6.4%

YoY respectively. Commercial vehicles sales grew 25%

YoY.

• March '18 diesel and petrol consumption recorded

robust growth of 7.9% YoY and 14% YoY respectively.

For FY18, diesel/petrol consumption stood at

6.3%/9.8% YoY respectively vs. 1.1%/8.8% in FY2017

• Foreign tourist arrivals (FTAs) expanded by 14% YoY in

March '18. India received maximum FTAs from

Bangladesh (19.6%), followed by UK (11.6%) and USA

(11%). In FY2018, FTAs grew 10% YoY.

• The 4QFY2018 capex aggregates reveal a decline in the

cost and count of a) newly announced, b) completed,

and c) revived investments projects. Although projects

under implementation rose, the number of investment

projects that were dropped also increased YoY.

• RBI's OBICUS survey for 3QFY2018 displays a) YoY rise in

capacity utilization to 74% (CU), b) strong growth in

new orders received (Order Books- OB), c) marginal

QoQ fall in finished goods inventory-to-sales ratio and

d) minor QoQ decline in raw material to sales ratio.

• Roads Ministry has reported a 20% YoY growth in the

kilometers of national highways constructed in FY2018

(at 9829km) vs. 8231km last year

Domestic Market Outlook

• Notwithstanding the macro concerns on crude, and

consequently, on inflation/currency/CAD, it is seen

that many high-frequency data indicators (IIP, monthly

vehicle sales, cement production, fuel consumption,

GDP print, personal & housing loan growth, air traffic,

foreign tourist arrival) point towards recovery.

• The initial set of Q4 results (till April end) have shown

encouraging trend.

a. The green shoots are visible in consumption trend

given strong growth in automobiles sales data,

FMCG sector indicating recovery in volumes, and

optimistic outlook on rural demand recovery.

b. Additionally, there has been encouraging

commentary coming in on the capex revival with

healthy volumes and improving capacity utilization

for cement along with overall infrastructure (roads,

metros, airport construction) and affordable

housing showing traction.

c. Though large cap IT earnings have been subdued,

the mid cap & small cap IT companies have

delivered good set of results. The pressure point

continues for PSU banks while select private banks

continued to gain market share.

• In the near to medium term, the market could

continue to remain volatile as inflation and currency

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worries persists combined with a busy political

calendar / pre-election year.

• Additionally, globally high equity valuations amidst an

environment of policy normalization, rising bond yields

and appreciating dollar could lead to readjustment in

risk premium as well as capital flows towards EMs

riskier asset class. Any correction in the equity

markets should be used as an opportunity to increase

allocation to equities.

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• The G-sec yield curve saw a lot of volatility during the

period between February to April 2018.

a. The period started on a cautious note before the

release of the review of the last monetary policy for

FY2018.

b. As the MPC sounded less hawkish than expected

some relief was given to the market causing yields to

come down.

c. Yields reversed their downward movement after a

rise in the US treasury yield and a fresh supply of

state government papers hitting the market.

d. The MPC's rising concern on inflation as evident in

the minutes of the monetary policy review and a

further increase in the crude prices dampened

sentiments further.

e. Further comments by the new US treasury head on

the possibility of more than expected hikes rate

hikes during the year also dealt a blow causing yields

to rise.

f. There was some respite for yields during March after

rising for the last few months. Sentiments were

upbeat as the rise in inflation was expected to

slower than expected and due to hopes of improving

liquidity as RBI announced to infuse to inject one

trillion rupees through term repos.

g. A fall in the inflation figures buoyed sentiment

further with market participants expecting RBI to

delay the rate hike and on reports that the

government was considering increasing the FII

investment limit caused yield to fall.

h. Further reports that the government was trying to

lower yields with a round of buyback and a strategy

to lower the burden for the next fiscal by issuing

more of shorter tenure securities caused a further

rally in yields.

i. The government's decision to issue bonds worth

`2.88 trillion during April-September '18 accounting

to only 47.56% of the government's budgeted fiscal-

year borrowing lower than 60%-65% in the last five

years gave major relief to market participants and

caused yields to plunge by 29 bps.

j. The month of April also began on a positive note as

RBI allowed banks to spread their mark to market

losses made in the last six months over the next four

quarters.

k. In the first monetary policy review for FY2019 RBI

reduced the forecasted inflation for the whole year

but rising crude prices globally amidst a heavy

supply of state government papers wiped out all of

the gains made since the beginning of the month.

l. Bond yields continued their upwards journey with

the release of the MPC minutes showing the

members turning hawkish along with a further rise in

crude prices and geo-political tensions in Syria and

the fall in the value of the Rupee against the dollar.

m.The ten-year benchmark 7.17%, 2028 bond ended

the period under review at 7.77% up 34 bps over the

close of January.

• In the latest monetary policy review four out of five

members of the MPC voted to maintain the repo rate

but revised downwards CPI inflation to 4.7-5.1% in H1

FY2019 & 4.4% in H2 FY2019 with upside risk and

continues to see uncertainty surrounding inflation on

the back of volatile oil prices, unknown impact of MSP

hike, state HRA revision, risk of fiscal slippages from

state & centre, outturn of monsoons, and rising input &

output cost pressures among manufacturing firms.

• Retail or CPI based inflation showed a weakening trend

during the period under consideration.

a. For the month of January consumer prices came in

at 5.07% due to the reversal in the seasonal spike in

vegetables. Inflation, however, continued to firm up

in large parts of the services sectors such as housing,

education and in recreation, amusement and

personal care and effects.

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b. For the month of February, it further moderated to

4.44% as prices of food and fuels cooled off. Inflation

in vegetables was 17.57% last month, down from

26.97% in the previous month.

c. Inflation came in at 4.28% for the month of Mar again

due to softening prices of food. Inflation in the

vegetables segment cooled to 11.7% in Mar from

17.57% in Feb however Core inflation on the other

hand did not paint a very positive picture increasing

to a 43 month high of 5.37%.

• Wholesale inflation also showed a moderation trend

during the period between January and March.

a. With cooling off of prices of vegetables and fruits as

well as fuel, WPI came off to a six-month low.

b. Continuing in February again the reduction in prices

of vegetables and fuel helped reduce the overall

level to 2.48% however prices of manufactured

items increased during the month.

c. WPI moderated slightly to the lowest reading since

July '17 to 2.48% in March '18. Food articles inflation

contracted in March at 0.29%. Deflation in

vegetables was 2.70%, pulses (20.58%) and wheat

(1.19%) in Mar. Inflation in 'fuel and power' basket

however rose to 4.70%.

• Indian exports remained weak between January and

March.

a. In January exports showed a healthy rise of 9.07% to

$ 24.38 billion led by engineering goods, petroleum

products, chemicals and pharmaceuticals but were

overshadowed by a rise of 26.1% in imports to

$ 40.68 billion.

b. For the month of February exports moderated to a

4.48% growth to $ 25.83 billion with rising figures for

drugs and pharmaceuticals, rice and electronic

goods. Imports however again showed a larger

increase of 10.41% to $ 37.81 billion as rise in oil

imports, shot up by 32%, and machinery, electrical

and non-electrical by 23%.

c. Exports ended the fiscal year with a contraction of

0.66% to $ 29.11 billion as organic & inorganic

chemicals recorded an increase in exports by 31.8%

to $ 1.97 billion. Imports continued to remain strong

expanding by 7.15% to $42.8 billion helped by an

increase of 13.9% in oil imports while gold imports

reduced by 40.3% to $2.49 billion.

d. India's overall goods exports increased 9.78% to $

302.4 billion in April-March ‘18 while imports surged

19.7% to $ 459.67 billion during the same period with

the trade deficit increasing to $ 156.83 billion in

FY2018 from $ 108.92 billion during last fiscal.

• The IIP index, the gauge for industrial activity

remained pretty stable between December to

February.

a. The index expanded by 7.1% in December led by a

solid performance of the manufacturing and capital

goods sector. The capital goods segment expanded

by 16.4% while the manufacturing sector as a whole

showed an expansion of 8.4%.

b. In January, the IIP expanded by 7.5% was mainly on

account of uptick in manufacturing sector which

grew by 8.7% and capital goods which showed a

sharp increase in output by 14.6%.

c. In February the index slightly cooled off to show an

increase of 7.1% as electricity generation eased

sharply to 4.5% during the month and the mining

output contracted 0.3%. Capital goods output,

which is a proxy to measure private sector

investment activity, soared 20% in Feb.

• Performance of the eight core industries showed a

weakening trend during the period under review.

a. Core industries posted a growth of 6.7% during

January with a double digit increase in the output

from petroleum refineries and cement sectors.

b. The output from the eight industries slowed down to

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5.4% in February with the cement output showing a

robust expansion of 22.9% during the month.

c. Core output slowed down to 4.1% in March mostly on

the back of a base effect. During the month five of

the eight core sectors recorded a sequential

moderation in growth.

d. For 2017-18, the cumulative growth in core

industries' output came in at 4.2%, lower than 4.8%

in previous fiscal.

• Liquidity conditions have remained in the positive side

during the quarter. The average net daily absorption of

liquidity from the system was to the tune of `100.75

billion in February, `309.84 billion in March and

` 495.18 billion till May 21, 2018.

• The manufacturing PMI just barely stayed in the

expansionary phase throughout the three months

under consideration.

a. The PMI for February recorded 52 as output and new

orders recorded a slower growth rate. Firms were

also seen raising their staffing levels in response to

greater production requirements.

b. The index fell to 51 just barely above the expansion

level during the month of March as new orders and

output both fell to their slowest pace since Oct of

last year.

c. The index improved slightly to 51.6 during April as

increased production in consumption and

intermediate groups outweighed the decline in

investment goods. New business rose for the sixth

consecutive month and sentiment was at its

strongest level since the introduction of the GST.

• Services PMI on the other hand see-sawed between the

expansion and contraction territory.

a. For the month of January, the index recorded a

reading of 51.7 as rising new business and a buildup

of backlog made workforces expand.

b. During February, the index went into the

contraction territory with a reading of 47.8 as both

activity and new work declined for the first time

since November 2017, with rates of contraction the

strongest since August 2017.

c. The index managed to get back into the expansion

territory with a reading of 50.3 underpinned by

greater inflow of new work as business sentiment

was at its highest level since July '17 and the firms

raised their employment levels at its fastest pace

since June '11.

Debt Market Outlook:

• Bond market has taken reasonable respite from the

recently announced H1 borrowing calendar for FY19.

This has temporarily waned the risk of supply overhang

however broader domestic as well as external

headwinds persists such as rising global bonds yields,

tighter global monetary condition, rising oil price,

weak GST collections, and rise in MSPs.

• Also, with relatively lower borrowing in the first half,

the risk of supply has shifted to second half with

potential to crowd out private borrowing and hence

talks are increasing in favor of increase in FPI bond

limit in the interim.

• Clearly, a watchful RBI along with prevalent headwinds

could keep the long bond yields trade in a range and

the upcoming inflation numbers followed with news

flow over monsoon will be critical factors to monitor.

Thus volatility may continue at the longer end of the

curve.

• It would also be important to see whether banks (large

player in debt market) resort to profit booking with

easing long term yields as they already sitting on high

SLR or will they participate in fresh buying.

• As we have been highlighting, there could be

tactical moves at the longer end of the curve

however unless there is view of directional

downward trending, one may find it difficult to

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generate superior risk adjusted returns in this

segment.

• The shorter end of the yield curve should draw respite

from end of seasonal financial year end liquidity

tightness and hence potentially could witness

contraction in yields with improving liquidity

conditions driven by higher government spending in 1H

FY19 and lean credit season.

• However, the T-bill issuance for quarter is pegged at a

weekly ̀ 15,000 crores along with G-sec issuance in 1-4

year segment of the yield curve could render volatility

at the margin. Despite these factors, we still believe

the shorter end segment of the curve is better

placed on relative basis.

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China – US: Trade war that looms!

Despite a mere 9% share of deals going to AI startups globally, China’s AI startup scene took nearly 50% of dollars going to AI

startups globally in 2017, surpassing the United States for the first time for share of dollars. (Source: CB Insights)

When it comes to deep learning-an advanced subset of machine learning, which uses algorithms to identify complex

patterns in large amounts of data-China has six times more patent publications than the US.

A one-off devaluation of the yuan or a steady but significant depreciation would create the expectation among investors

and businesses of further falls to come, triggering capital outflows from China on a scale even greater than those that

followed Beijing’s small 2015 devaluation and saw China’s foreign exchange reserves depleted by US$1 trillion. A

confidence crisis could erupt.

Dumping its vast holdings of US government debt in retaliation wouldn’t be a wise idea and would result in losses to

Chinese reserves, as opportunist players and countries would take advantage of the “act of dump”.

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Source: CB Insights

Artificial Intelligence Patents Filed

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War, is it? Russia and US are head on!

The elevated energy basket has perturbed the market participants, as Syrian war continues to garner media glare.

Syrian Civil War is an ongoing multi-sided armed conflict in Syria fought primarily between the Ba'athist Syrian Arab

Republic led by President Bashar al-Assad, along with its allies, and various forces opposing both the government. (Source: Wikipedia)

It’s been at the world centre-stage since 2015 (ever since Russia has been active and supporting the local government of

President Bashar al-Assad.

On 7 April 2018, a chemical attack was reported in the city of Douma, with 70 people killed, which Syrian government

denied of using. (Russia – US clash on views)

This war torn Syria could be a point of distrust and hegemony amongst Russia, Iran and the US. (A war which is raging for

past 7 years)


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Source: Reuters

Why is US administration upset? A rise in IPR theft

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International organizations have accused the Syrian government, ISIL, and Syria rebel groups of severe human rights

violations, and of many massacres. The conflict has caused a major refugee crisis. (Source: Wikipedia)

Uncertainty, fades?

• Gold's appeal as an "insurance asset" may still shine through in 2018 as global economic-growth uncertainties

proliferate. Gold demand of 973.5t was the lowest Q1 since 2008. The main cause was a fall in investment demand for

gold bars and gold-backed ETFs, partly due to range-bound gold prices. (Source: www.gold.org)

• Unlike the digital currency, some investors still see gold as a traditional store of value, and a natural safe-haven asset,

particularly as a hedge vs. the dollar and inflation.

• In times of geopolitical crisis, gold has also historically been used as an "insurance" option and as a liquidity provider.

Source: GFMS; World Gold Council, Bloomberg.

I V

13

MCX Gold is trading in an upward sloping channel. Recently prices took support at ̀ 30,870/10 gm of lower channel and is

holding well above this level. At the current juncture, Gold is trading on a strong note, if prices managed to close above

`31,400/10gm, we may witness fresh buying above this level and this may pave a path towards `32,100/10gm and

`32,300/10gm.

MCX Major supports: ̀ 30,870 and ̀ 30,500

MCX Major resistances: ̀ 31,400 and ̀ 32,100

We advise buying above ̀ 31,400/10gm on closing basis with a target of ̀ 32,100/10gm and ̀ 32,300/10 gm, while stop

loss placed below ̀ 30,800/10gm on closing basis.

Please see Appendix II at the end of this report for Important Disclosures and Disclaimers and Research Analyst Certification for this section


OVERV IEW

Crystal gazing…

Source: Tickerplant

I V

14

MCX Silver


OVERV IEW

Source: Tickerplant

Silver is trading in an upward sloping channel since the first week of February. At the current juncture, prices are

struggling to surpass immediate resistance at `40,050/kg. If Silver manages to surpass this level, this may pave the path

towards ̀ 41,000/kg in a near term.

On the contrary, if silver fails to surpass this resistance we may see prices will be trading in lower band of upward sloping

channel.



We advise buying on closing basis above `40,050/kg with a target of `41,000/kg and `41,500/kg, while stop loss

placed below ̀ 39,200/kg on the closing basis.


I V

15


OVERV IEW

Crude Oil:

Kingdom’s whim

Saudi Arabia told OPEC it pumped the least crude since production cuts began in early 2017 to help reduce a global glut.

It reported output of 9.868 million b/d last month, the lowest since January 2017, according to a monthly report by the

organization.

The Saudi numbers back up Energy Minister Khalid Al-Falih comments last month that the kingdom is prepared to keep

supply restrained, even though inventories are back to normal.

Source: OPEC

I V

16

Source: Bloomberg

Rig counts on the rise; suggestive of a bullish mood amongst oil producers which could take some time to die down.

It is in self interest of the US also to get good prices for shale oil and other crudes to encourage employment in the energy

sector.


OVERV IEW

I V

17

Source: Bloomberg


OVERV IEW

REGION COUNT WIW CHANGE SINCE 05/27/16*

TOTAL U.S. LAND OIL RIGS

ADMORE W000FORD

BAKKENIWIWSTON

BARNETT

CANA W000FORD

D.J-NIO8RARA

EAGLE FORD

GRANITE WASH

MISSISSIPPIAN

PERMIAN

ALL OTHER REGIONS

*SINCE BAKER HUGHES’S MAY 27,2016 NATIONAL RIG COUNT LOW

844

2

57

0

70

24

66

13

5

463

144

+10

0

0

0

+1

+2

-1

+2

+1

+5

0

+528

+1

+35

-2

+42

+11

+40

+7

+2

+326

+66

18

MCX Crude oil trading on a strong note after range break out between `4,460/bbl and `4,615/bbl. Crude oil prices are

holding well above the upward sloping channel, as long as prices are holding above this trend line we may see potential

upside till `5,150/bbl. Moreover, if these positive sentiments remain intact we can see 5,500/bbl which is 200% of an

immediate wave as replicated in a chart.



We advise buying on closing basis above `4,810/bbl with a target of `5,150 and `5,250/bbl while stop loss placed

below ̀ 4,510/bbl on the closing basis.


I V


OVERV IEW

Source: Tickerplant

MCX Crude

19

USDINR

USDINR pair is trading on a strong note. We may see some selling pressure on the higher side with the help of long upper

shadows in candlestick. However, as long as the pair is holding above ̀ 66.50 tone remain positive.

On the contrary, if pair closes below ̀ 66.50 we may see ̀ 65.50 cannot be ruled out on the downside.

Immediate supports : ̀ 66.50 and ̀ 65.50

Immediate resistances : ̀ 68.00 and ̀ 68.40

I V


OVERV IEW

Source: Bloomberg

IDEAS OF THE RECENT PAST

V

20

Equity Savings/Income Funds

To minimize the volatility in equity markets and help

conservative to moderate investors benefit from the

growth potential, we recommend allocation to this

category of funds. These funds aim to generate regular

income from a less risky arbitrage portion and at the same

time allows you to participate in the equity market growth

moderately.

Investment Rationale

• Post the changes made in the budget with regards to

Debt Mutual Fund Taxation Structure, there was a lack

of tax efficient products for conservative to moderate

investors having 1–3 years time frame. Thus, the need

for a Tax Efficient Solution for an investment horizon

of 1–3 years has emerged strongly.

Investment Option Feature Risk Profile Taxation*

• The investment options currently available for a 1-3 years investment horizon

*- Please consult your tax advisor for details

** - W.e.f. April 1, 2018, dividend from an equity oriented fund is subject to DDT @ 10%+surcharge+cess. Also, long term capital gains on

redemption of units of equity oriented funds shall be taxed @ 10%+surcharge+cess.

STCG - 17.94%

LTCG**- 11.96%

STCG - 35.88%


• No single asset class outperforms every single year. A

Diversified/Asset Allocation portfolio across asset

classes can help cushion the occasional shocks with a

potential of giving better risk-adjusted returns

• Investment need of an investor - benefit from the long

term return potential of equities, generate regular

income with reduced portfolio volatility, beat Inflation

through a tax efficient solution

• Thus, we suggest a Portfolio that could constantly

rebalance to provide optimal balance between

expected risk and return of an investor

Investment Strategy

• The Funds adopt a diversified strategy with an

efficient mix of the 3 strategies – Equity, Arbitrage and

Debt, which helps in reducing volatility while

providing opportunities to participate in market

upside while restricting the downside

• Equity - The spot or directional equity exposure

provides the potential for growth by participating in

the long term prospects of Indian equities

• Arbitrage - The arbitrage strategy will take advantage

from the price differentials / mis-pricing prevailing for

stock / index in various market segments (Cash and

Futures)

• Debt – The fixed income exposure aims to generate

regular income by investing in debt instruments.

Maturity profile of debt instruments is based on

interest rate outlook and current market conditions.

Suitability:

These funds are less risky as compared to equity funds

since it has only a limited exposure to unhedged equity.

Significant portion of these funds have a risk profile

similar to that of arbitrage funds. Thus, it is suitable for

conservative to moderate investors as well.

V

21

The contents provided herein above are derived from Fund House Presentation/Newsletter

Note: Mutual Fund investments are subject to market risks. Please read the Statement of Additional Information / Scheme

Information Document issued by the Mutual Fund and go through all the risk factors mentioned therein carefully before

investing.

For further details in this regard, please get in touch with your Wealth Manager.


V

22

ICICI Prudential Value Fund – Series 20

Government of India has taken few structural reforms that

may revive economy. With budget around, market is

expecting hat Government may increase expenditure in

rural economy as well as introduce measure to kick start

investment cycle. With recent policy action on global

front like China shutting down Production in sectors like

Chemicals, Metals, Papers etc. may lead to demand

supply mismatch and can help domestic companies in

related sectors.

The fund management team believes that all these are

throwing investment opportunities in various sector and

ICICI Prudential Value Fund – Series 20 is well poised to

benefit from above opportunities.

Key Fund Features

• Themes that can benefit from government reforms

like Infrastructure, banking & finance and rural

consumption that are likely to play out well with ~3.5

years investment horizon

• Ability to reduce net equity risk at market peaks

• Aims to limit downside of the portfolio by using

hedging strategies at the fund managers discretion

Fund Facts

Structure / Fund Category

NFO Period

Fund Manager

Benchmark Index

A close ended equity scheme (Listed) (Tenure – 1262 days)

17th January 2018 to 31st January 2018

Sankaran Naren, Vinay Sharma & Mittul Kalawadia

S&P BSE 500 Index




investing.


Suitability:

The fund is suited for investor seeking to participate in the

expected growth in equities by investing across sectors which are expected to benefit out of Government’s action

plan.


V

23

Aditya Birla Sun Life Resurgent India Fund – Series 4


Indian economy is at an inflection point due to stable

macros and renewed focus on reforms by the Government.

In addition, it is supported by improved global growth

scenario and strong global liquidity which will help Indian

exporters and corporate earnings growth. Also, there has

been a huge shift amongst local investors from physical

assets towards Indian equities (SIP accounts stood at 13.5

million with a total monthly book of around `4,000-4,500

crores) fueling local liquidity plus lower interest rates.

Government Policy measures, pick up in corporate

earnings growth, lower interest rates and expanding

return on equity make us constructive for the outlook of

Indian equities in the medium to long term. We believe

that this is an opportune time to invest and allocate to

Equities based on the asset allocation from a medium to

long term investment horizon. The proposed New Fund

Offering is a unique opportunity which offers a

combination of - flexi cap fairly well diversified

portfolio to capture the growth momentum in the

equity markets along with an aim to limit the downside.

Key Fund Features

• An offering designed to offer investors the dual

advantage of Alpha generation through active equity

management capturing significant part of the equity

upside and an attempt to limit the downside risk from

any unforeseen event.

• The Equity allocation will be through a fairly well

diversified portfolio of around 30-45 stocks across

sectors and market capitalizations, following a flexi

approach. The stock selection will be based on the

fundamentals and long term growth potential of the

company and the valuations and quality of the stock.

• Largely the allocation will be made in companies

benefitting from the ongoing reforms and policies and

expected to do well in the next 3 years. High potential

companies will be analyzed basis their business

models, that will benefit from increasing demand in

the economy and those that exhibit higher growth

relative to their peers.

• The fund will follow largely a bottom up approach to

portfolio construction and management with some top

down overlay.

• To limit portfolio downside risk the fund proposes to

buy long dated Nifty put options which will act as a

hedge to the portfolio.

• Unique mechanism for timely profit booking will be

through dividends, which the fund manager endeavors

to payout consistently.

Fund Facts

Structure / Fund Category

NFO Period

Fund Manager

Benchmark Index

Option Available

Liquidity

A 3.5 year close ended equity scheme

June 23, 2017 – July 7, 2017

Jayesh Gandhi

S&P BSE 200 Index

Growth, Dividend and Dividend Sweep

Listed


Suitability:

The fund is better suited for investors who want to benefit

from equity markets and at the same time limit the

downside risk associated with the asset class.

Key Risk Factors

• Risk of relative concentration, Volatility, Events, Price

and Markets

• Impact of various Micro and Macro domestic and

economic factors affecting the Indian Equities Market

• Underperformance compared to benchmark due to

Nifty put option premium or due to poor performance

of portfolio stocks. However, strong alpha generating

capabilities of the AMC due to the stock picking skills

can likely mitigate the underperformance risk

substantially over the tenure of the fund.

V

24




investing.



V

25

Old Bridge Capital Management PMS

Why Old Bridge Capital Management

• Investment Team cumulative experience of 65 years in

Equity Research

• Aligning with a manager with

o An established 13 year public markets track record

o Managed a billion dollar portfolio with 90% active

weights

o Outperformed the benchmark every single year over

the last 10 years

• Investment style has been

o Consistent with Stock Picking

o Adopt a buy and hold strategy

Investment Strategy

• The Investment Strategy focuses on identifying

Companies across Sectors and Market-caps, which are

the dominant market participants in their respective

industry.

• Concentrate on identifying businesses early into a

cycle. The underlying companies have to belong in

industries that are consolidating, demonstrate

leadership skills and have financial discipline.

• The stock selection strategy involves bottom up

research of companies that are capital efficient,

financially disciplined, have monopolistic

characteristics and are gaining market-share-

available at a reasonable valuation.

• Portfolios may not be necessarily diversified across

industries

Portfolio Strategies

• “All Cap Strategy”

o Diversified Style with 12-20 stocks

o No defined market cap framework, given the

selection style of companies the stocks would be in

the $50million-$2billion market cap range

o Portfolio of companies which meet the criteria of

Capital efficiency, Low leverage, Profit making with

low capex scheduled and Low valuation

• “Thematic Portfolio”

o Concentrated Style with a fixed maturity period

o Portfolio would align to the fastest growing part of

the economy/ industry / subsector and build a value

chain around the specific sector/ theme

o It takes idea from the ongoing disruption of cash

flows in rural India and the lower dependence of the

rural economy from the monsoons. It will put a

portfolio of companies together that benefit from

the increased cash flow in the system.


V

26

Portfolio Performance as of 30th April, 2018

Period

1 month

3 months

6 months

1 Year

Since Inception

Investment Team

• Kenneth Andrade is the Founding Director and Chief

Investment Officer of Old Bridge Capital Management.

He manages the investment process and leads

investment ideation for inclusion of stocks within the

investment portfolio at Old Bridge. He has over 25

years of experience in Indian Capital Markets in

portfolio management and investment research. Prior

to this, Kenneth was a Chief Investment Officer at IDFC

Asset Management.

• Sanjay Dam is an Investment Analyst and has over 21

years of experience in Indian Capital Markets in

Institutional Investment Research and Equity Sales.

Prior to this, Sanjay worked as Senior Vice President,

Institutional Equities Sales at Motilal Oswal Securities

for more than a decade.

• Gauri Anand is an Investment Analyst and has over 12

years of experience in investment research. Prior to

joining Old Bridge Capital Management, she worked as

Vice President – Research at Phillip Capital India for 8

years.

• Rupanjana Sur is an Investment Analyst and is

responsible for researching and analyzing companies

within Old Bridge’s investment mandate. She has over

9 years of experience in investment research and

financial services. Prior to this, she was in corporate

credit ratings at Dun & Bradstreet, India, where she

was responsible for assigning ratings to companies

across sectors.

Portfolio

6.38%

0.43%

11.32%

40.05%

32.22%

(30/08/2016)

BSE500

6.53%

-1.95%

3.88%

15.94%

16.73%

Period

1 month

3 months

6 months

1 Year

Since Inception

(30/08/2016)

All Cap Strategy Thematic Portfolio

Portfolio

10.24%

2.59%

-0.87%

19.57%

28.80%

BSE500

6.19%

-2.61%

3.91%

15.43%

14.19%

Note: Returns over 1 year period are annualised. Returns are adjusted for inflows/outflows. Report Options : After Expenses, TWRR - Daily Valuation


Note: The contents provided herein above are as provided by the Old Bridge Capital ManagementPrivate Limited. You

arerequested to read the Disclosure document and PMS agreement of Old Bridge Capital Management Private Limited

PMScarefully before availing their services as Portfolio Manager to get more insight about them, their services and

tounderstand the nature of investment and the various risk factors mention therein.


Old Bridge Vantage Equity Fund

Old Bridge Vantage Equity Fund is a closed ended category III AIF.

Investment Strategy

• Create a portfolio of companies which meet the criteria of

o Capital efficiency, Low financial leverage, Low va luat ions and are Monopol i s t ic /Consolidators of the Industry

• Focused on finding “value” in the current market

• Concentrated in themes but diversified in terms of stocks:

o Early cycle asset intensive businesses

o Mid cycle rural businesses

o Manufacturing/Engineering businesses

o Demerg ing Oppor tun i t i e s - whereve r applicable

Portfolio Strategy

• Diversified Style with 12-20 stocks

• No defined market cap framework, given the selection style of companies the stocks would be in the $50million-$2billion market cap range

Key Terms

• Minimum commitment: 1 crore

• Term: Closed ended scheme for 3 years from final closing

• Drawdown schedule: Either 100% at time of subscription or 25% at time of subscription followed by two drawdowns of 50% & 25% within 6 months of first close

• Management Fee: Upto 2.25% p.a. (% of Net Asset Value)

27


V

Note: The contents provided herein above are as provided by the Old Bridge Capital Management Private Limited.

Please refer the Private Placement Memorandum (“PPM”) issued by the fund carefully to understand the nature of

investment and the various risks involved in the said investments.


28


V

Avendus Absolute Return Fund

Avendus Absolute Return Fund is an open-ended category III Alternate Investment Fund (AIF) registered with SEBI.

Investment Objective

The Fund seeks capital appreciation and positive returns in an efficient, risk adjusted manner through long and short positions in equities and indices.

Investment Strategy

The Fund strategy is intended to produce absolute

returns with less volatility than the overall stock market and low correlation to conventional asset classes, across variety of market scenarios.

With active sector and stock views, fundamental stock picking, not focused on pair trades and using puts and futures to short and hedge the long portfolio, the fund targets to generate a gross return of 15%–20% keeping the volatility in the range of 5%–9%.

Key Terms of the Fund

Investment Manager

Minimum Investment

Placement Fee (one-time)

Hurdle Rate/HWM

Performance Fee

Taxation

Management Fee

Avendus Capital Public Markets Alternate Strategies LLP

1 crore

Upto 2%

10% p.a.

20% without catch-up

Taxation at Maximum Marginal Rate (Business income) at fund level

1 Cr < 5 Cr

5 Cr < 20Cr

20 Cr & above

Year 1

1.25%

1.00%

0.75%

Year 2

1.00%

0.75%

0.60%

Year 3

1.00%

0.60%

0.60%

29


V


Note: Please refer the Private Placement Memorandum (“PPM”) issued by the fund carefully to understand the nature of


An investment in the scheme involves significant risks and is suitable only for those persons who can bear the economic

risk of the loss of their investment and who have limited need for liquidity in their investment.


Month

CY 17

CY 18

Jan

-

0.82%

Feb

-

1.40%

Mar

1.55%

1.65%

Apr

2.25%

1.78%

May

2.00%

-

Jun

1.21%

-

Jul

1.17%

-

Aug

1.49%

-

Sep

1.54%

-

Oct

1.47%

-

Monthly Fund Performance

Nov

0.92%

-

Dec

0.91%

-

Performance is gross of Fees and Taxes

30


V

IDBI Bank Basel III Additional Tier-I Perpetual Bond

IDBI Perpetual Basel III Bond is a unique opportunity for

investors to invest in a high coupon bearing instrument

plus a benefit to gain from the possible capital

appreciation in the near future in case of interest rate

cuts and/or rating upgrade.

Opportunity:

• The risk reward trade-off is attractive at the current

market yield priced to the call option exercise date

• Attractive coupon gives an opportunity to earn decent

regular income

• In next few quarters, the bank could be in a positive

cycle as far as reduction in NPAs and improvement in

capital adequacy is concerned

• There are certain risks associated with the BASEL III

Perpetual bond like - non-payment of coupon, capital

write down etc. However considering the fact that GOI

is both the majority shareholder in the Public sector

banks (PSBs) and the guardian of India's financial

system, it is likely that Banks, including IDBI Bank,

shall receive support from GOI in the event of distress.

Though the likely support by GOI does not eliminate

the inherent risk of the bond, it can surely provide

reasonable comfort to the investors.

• Any up-gradation in the rating may provide capital

appreciation.

Risk Factors

The instruments qualifying as capital under Basel III have

far greater loss-absorption features. Perpetual bonds

have equity-like features. These instruments have coupon

discretion at all points of time, high capital thresholds for

coupon non-payment, and principal-loss-absorption

clauses.

31


VNature

Coupon

Frequency

Call Option

Coupon Discretion

Coupon payment

Loss absorption feature

*Please refer Disclosure Document for further details

The contents provided herein above are derived from the disclosure document

Note: Please refer the Information Memorandum issued by the issuer carefully to understand the nature of investment

and the various risks involved in the said investments.


Unsecured, subordinated, non-convertible, perpetual bonds which will qualify as Additional Tier 1 Capital

10.95% Non-cumulative

Annual (20th January)

5th year from the date of allotment (20/01/2022)

Full discretion at all times to cancel coupon payments

The coupon will be paid out of distributable items. In this context, coupon may be paid out of current year’s profits. However, if current year profits are not sufficient, coupon may be paid subject to availability of sufficient revenue reserves (those which are not created for specific purposes by the Issuer) and/or credit balance in profit and loss account, if any. However, payment of coupon from the revenue reserves is subject to the Issuer meeting minimum regulatory requirements for CET 1, Tier 1 and Total Capital ratios (each as defined and calculated in accordance with the Basel III Guidelines) the requirements of capital buffer frameworks set out in Basel III Guidelines.

• Loss-Absorption Features as per RBI's BASEL III norms applicable

• Instrument will be temporarily written down upon CET I breaching the pre-specified trigger of 5.5% before March 31, 2019, and 6.125% on and after March 31, 2019

• Instrument may be permanently written off at the option of RBI on occurrence of trigger event called Point of Non-Viability (PONV) trigger

• PONV trigger shall be determined by RBI

Key Features

32


VProduct Features

Underlying

Issuer

Credit rating of issuer

Nifty 50 Index

Reliance Home Finance Ltd.

PP-MLD AA+ (credit watch with developing implications) by CARE

Structured Product – Nifty Golden Cushion – (Principal Protected/Rated/Listed/Secured/Redeemable NCD)

Product Payoff

• A 36/42 months principal protected yield enhancement product

• Initial level is closing level of Reference Index as on the Trade date

• Final Level is Avg. of closing levels of Nifty 50 Index at the end of April to July 2020 (i.e. 4 Observations aligned with

F&O expiry)

• Digital Level is 105% of Initial Level

• Participation Rate (PR) : 860%

• Spread on which PR is applicable: 100% - 105% (as a % of Initial Level)

• Max Coupon: 43% absolute (10.76% CAGR)

• More than 90% historical probability** of Nifty being more than 5% in 3 year holding period

Product Features

Scenario

If Final Level ≥ Digital Level

If Final Level > Initial Level but < Digital Level

If Final Level < Digital Level

Pay off

Payoff = Principal + Max Coupon (43% absolute)

Payoff = Principal + (PR * Performance)

Payoff = Principal

Please refer the Information Memorandum issued for detailed information and risk factors related to the Fund.

** Historical rolling probability is calculated considering 36 months holding period Nifty returns from January 2001

to May 2017

33


V

Payoff (assuming Initial level of 10,000)

Scenario

1

2

3

4

5

6

7

8

9

10

Initial Level

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

10,000

Final Level

13,000

12,000

11,000

10,500

10,400

10,300

10,200

10,100

9,500

8,500

Performance of Nifty 50

30%

20%

10%

5%

4%

3%

2%

1%

(5%)

(15%)

Coupon (absolute)

43.00%

43.00%

43.00%

43.00%

34.40%

25.80%

17.20%

8.60%

0.00%

0.00%

CAGR

10.76%

10.76%

10.76%

10.76%

8.81%

6.78%

4.64%

2.39%

0.00%

0.00%

The contents provided herein above are derived from Issuer

Notes: 1. This is merely an illustration and it does not display all the payoff scenarios. It excludes fees, if any.2. The final yield may vary depending upon the rate at which secondary market trade is executed.

Note: Please refer the Information Memorandum issued by the issuer carefully to understand the nature of investment and the various risks involved in the said investments.


PRODUCT OPPORTUNITY

V I

34

The Opportunistic Portfolio - JM Financial Services

Limited (JMFS) Discretionary Product

Product Features

• Opportunistic Portfolio is a market capitalization

agnostic equity portfolio i.e. it may invest across

market capitalizations

• Portfolio may comprise Large, Mid as well as Small cap

companies in the weights as felt appropriate by the

Portfolio Manager at the time of investment

(principally the Portfolio Manager may not invest more

to than 15% in a single company)

• Portfolio ideally to be invested across 12–25 stocks

depending upon opportunities

• Portfolio may be concentrated across 3-4 industries or

diversified across many industries depending upon

opportunity at the time of investment. No fixed rule

here except that the single sector exposure may not be

more than 40% at the time of investment

• Endeavor is to pick those businesses and stocks which

could potentially deliver outsized absolute returns

over the next 2 to 3 years

• Approach will be to generate absolute returns over a

period of time by building and retaining alpha in the

Portfolio rather than beating benchmark

• Bottom up approach for stock selection

• Active cash call in the Portfolio

Portfolio Strategy

• Portfolio building Strategy

• Pillar of portfolio strategy is to focus on equity

opportunities where earning momentum is strong due

to surge in sector or company specific catalysts w.r.t

multiyear story or 2 to 3 year outlook. Intention to

invest 40%-50% of the portfolio money in these stocks

depending upon opportunities at the time of

investment.

• Intention to deploy 25%-30% of the money in mature

business to take benefits of depressed prices in bad

business cycles or bad market periods. In this case of

stalwarts (mature and stable businesses) across the

industries, strategy is to look for price ranges from

where these stocks may bounce by 30%-50%, over a

short to medium term time frame.

• Intention to deploy 15%-20% of the Portfolio money in

some value stocks/unique/special situation ideas

across market caps.

• Also, the manager may stagger investments in equity

shares over a period of time in case if enough

opportunities are not available.

• Exit Strategy

• Next 2 to 3 years earning outlook discounted in the

stock price at reasonable valuations.

• If there is a change in underlying fundamentals of

business and stock is unlikely to perform in 2 to 3 year

time frame.

• Portfolio will have a flexibility to build cash in case of

return potential being achieved and where there is a

significant chance of a correction, or range bound

movement in the markets to enhance returns.

Fund Manager

• Mr. Kunal Kalra has done MBA (Finance). Currently, he is

heading Non-Discretionary Product. He is working with

JM Financial Services Limited (“JMFS”) since November

2007 as Fund Manager.

• Overall experience of 19 years including over 16 years

in equity research and fund management. Prior

assignment includes working as Fund Manager Equity

PMS – Sahara Asset Management Company (May 2006 –

July 2007). Before that headed the Equity Research

team at Parag Parikh Financial Advisory Services Ltd

(October 2003 – May 2006) and also worked at H.C. Gutt

& Co. Pvt. Ltd. – (May 2000 – September 2003) as a

research analyst.

PRODUCT OPPORTUNITY

V I

35

Client 1

Client 2

Client 3

Client 4

Client 5

Client 6

Client 7

Client 8

Client 9

Client 10

Absolute Returns (%) Compound Annualised (%)

Portfolio Nifty BSE 200

Inception Date

Returns as on 30th April, 2018

The contents provided herein above are derived from JMFS PMS

Performance: Strong Track Record on NDPMS Platform

BSE 200NiftyPortfolio

24-Oct-08

27-Oct-10

02-Apr-13

19-Sep-14

01-Jan-15

20-Jan-16

11-Mar-16

06-Sept-16

23-Sept-16

09-Jan-17

1250.9

347.5

212.5

92.5

78.3

69.9

70.4

41.5

29.7

40.5

419.7

87.5

79.4

39.9

29.9

41.5

43.0

22.0

23.4

28.9

495.1

104.6

97.1

48.7

37.2

47.3

49.5

25.1

25.9

31.3

31.4

22.1

25.1

19.9

19.0

26.2

28.3

23.5

17.6

29.8

18.9

8.7

12.2

9.7

8.0

16.5

18.2

12.8

14.1

21.5

20.6

10.0

14.3

11.6

10.0

18.6

20.7

14.6

15.5

23.2

Note: To indicate the performance of the Portfolio of top 9 investors under Non-Discretionary PMS (“NDPMS”) of JMFS

vis.a.vis markets, the above table along with individual investors' Portfolio performance, we have provided performance

of NIFTY and BSE200 index for information purpose only. However, considering the facts that the NDPMS is an advisory

product and the investment approach for each investor differs according to Investment Objective and Risk Profile of the

respective investor, the Portfolio of each investor under NDPMS is customized as per the requirement of the investor.

Hence, the performance of the Portfolio of the investor cannot be benchmarked to any specific indices.

Please read the Disclosure document and PMS agreement carefully before availing the aforesaid services to get more

insight about the services and to understand the nature of investment and the various risk factors mention therein.


PRODUCT OPPORTUNITY

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36

Kotak Portfolio Management Services - Special

Situations Value Portfolio

Why Kotak PMS

• Amongst the Oldest PMS’ on the street

a. Over a decade of experience in the Indian capital

markets

b. Parentage support from Kotak Mahindra Asset

Management Co

• Proven track record of market beating performance

a. Since inception, Special Situations Value portfolio

has generated a CAGR of 28.8 % vs. Nifty 500 at

15.6%

• Strong Research and Operations team

a. 7member research team

b. In-house, top-notch, IT systems and back-office

support

Investment Strategy

The strategy is to invest in all listed equity and equity

related instruments with emphasis on capturing Value and

Special Situation opportunities. Key investment strategy

parameters are as follows:

• Large market opportunity - Market Size at least 2

times of company’s current sales. This gives the

company a long runway for future growth.

• Businesses with robust competitive advantages -

Strong brands, High Switching costs, Network

economics, Low cost advantages or Innovative

products

• Strong Financials and Earnings Growth - Prefer low

debt companies and the portfolio debt to equity is

under 0.5x. The fund manager prefers companies with

earnings growth and margins higher than their peers.

• Management Dynamism and Good Corporate

Governance - Prefer companies with passionate and

transparent management. Asset turns and working capital

turns at industry levels or trending there.

• Fair Valuations - Look to buy businesses at fair

valuations, where future earnings growth is not priced

in

The portfolio shall be a mix of Value Opportunities and

Special Situations.

• Value Opportunities - are ones, where in the opinion of

the fund manager, the stock is trading at a discount to

its intrinsic value. The discount should be such that it

offers reasonable ‘Margin of Safety’ for an investment

in the stock due to multiple reasons i.e. temporary miss

in performance, risk aversion at broad market level,

regulation uncertainty, etc. As uncertainty regarding

these aspects abates, the Intrinsic Value is expected to

be realized.

• Special Situations - These shall be investment

opportunities dependent on the probability of

occurrence of one or more corporate events, rather

than market events. These situations can largely be

classified as Price related situations, Merger related

situations, Corporate Restructurings, etc.

Key member of the investment team

Anshul Saigal : Head - PMS; Senior Vice President &

Portfolio Manager

Key Responsibilities: Heads the Portfolio Management

Services (PMS) business of KMAMC. He is an expert on

value investing principles – preserving capital and

generating market beating returns.

Experience: 16 years of Indian capital markets, of which

he has spent over 10 years with Kotak Portfolio

Management Services. Prior to this, Anshul has worked

with JP Morgan (Equity Research), ICICI Bank and Standard

Chartered Bank, where he analyzed equities and

corporate credit.

Educational Background: MBA (Finance), B.E. (Industrial

Engineering)

PRODUCT OPPORTUNITY

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Performance

• KMAMC Special Situations Value Model 1 Inception Date: 31st July 2012

Period

Strategy

Nifty 500

Note: Data as on 30th April 2018. Returns are of Model Portfolio (net of management fee). Returns are annualized for

periods greater than 1 year

3 Months

-4.6

-2.1

6 Months

-1.1

3.7

1 Year

15.2

15.6

3 Years

24.0

12.0

5 Years

34.1

15.4

Since Inception

28.80

15.6

• KMAMC Special Situations Value Model 2 Inception Date: 19th Sept 2017

Period

Strategy

Nifty 500

3 Months

-5.5

-2.1

6 Months

-0.7

3.7

1 Year

–

–

3 Years

–

–

5 Years

–

–

Since Inception

–

–

Portfolio Construct as on April 30, 2018

*- As per Kotak AMCs internal classificationSource: AMC Presentation

PRODUCT OPPORTUNITY

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Please read the Disclosure document and PMS agreement carefully before availing the aforesaid services to get more

insight about the services and to understand the nature of investment and the various risk factors mention therein.



Term

Benchmark

Portfolio Composition

Investment Approach

Fee

Description

Nifty 500

• 10-20 stocks

• Addressable Market Capitalization: Agnostic

• Bottom-up

• Agnostic to business segment/sectors

• Fixed Management fees: 2.5% per annum (payable quarterly)

• Performance fees: NIL; Brokerage: 0.1%;

• Custodial charges: As levied by custodian

• Exit Load: 3% (1st Year), 2% (2nd Year), 1% (3rd Year)

PRODUCT OPPORTUNITY

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Alchemy Leaders of Tomorrow Fund Tranche IV

Alchemy Leaders of Tomorrow is a CAT III Alternative

Investment Fund (AIF) which seeks to generate long term

absolute returns on investor’s capital by creating a

concentrated portfolio focused on companies showing

best traits of adaptability to disruptions, driven by

innovation & ingenuity.

Investment Theme

• Indian economy over the last 3 years has gone through

several disruptions like:

‘Aadhar’, GST, Demonetization, RERA, Bankruptcy

Code and emergence of online commerce

• These changes happening in a short period of time are

expected to challenge a number of existing business

models

• From within these challenges, opportunities will also

emerge and companies that adapt the best will be

winners

• As the effects of these disruptions play out over the

next few years, adaptability and resilience are

expected to become the “New Normals”

Investment Strategy

• The Fund seeks to generate capital appreciation by

investing in (i) listed Indian equities, (ii) Private

Investment in Public Equity (“PIPES”) on listed Indian

equities, and (iii) IPO and pre-IPO opportunities

• The investment allocation will be multi-cap & sector

agnostic

• Concentrated portfolio that may consist of 15 stock

ideas

• Endeavour will be to focus on companies showing best

traits of adaptability to the new economic normal,

driven by innovation & ingenuity.

• Alchemy’s investment philosophy is “Growth at

Reasonable Price” (GARP). The approach is rooted in

the hypothesis that India is a high growth economy and

the best way to play this is to identify and invest in

companies which are best equipped to take advantage

of emerging domestic and global opportunities.


Hiren Ved: Co-Founder & CIO – Hiren has been CIO at

Alchemy India since 1999 managing / advising assets of

over USD 1.05 billion. With about 2 decades of experience

in the Indian equity markets, he has created a solid

foundation in bottom-up research and stock picking. He

serves as a Whole Time Director of Alchemy India. He is a

qualified cost accountant, and also holds a Diploma in

Banking & Finance.

Performance

Alchemy High Growth Inception Date: 8th May 2002 AUM: 2,475.45 crores

Period

Alchemy High Growth

BSE 500

3M

-2.0%

-2.0%

6 M

3.1%

3.9%

1Yr

11.3%

15.9%

3Yr

15.7%

12.0%

5Yr

21.6%

15.3%

Since Inception

25.4%

17.1%

PRODUCT OPPORTUNITY

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Note: Data as on 30th April 2018, the above performance figures are aggregate of all clients; the investor’s actual

portfolio may differ



An investment in the fund involves significant risks and is suitable only for those persons who can bear the economic risk of

the loss of their investment and who have limited need for liquidity in their investment.


Alchemy High Growth Select Stock Inception Date: 19th Dec 2008 AUM:2,410.00 crores

Period

Alchemy High Growth Select Stock

BSE 500

3M

4.0%

-2.0%

6 M

8.9%

3.9%

1Yr

20.5%

15.9%

3Yr

19.1%

12.0%

5Yr

27.1%

15.3%

Since Inception

25.1%

16.1%


Term

Scheme Name

Investment Managers

Investment Horizon

Underlying Asset Class

Redemption Windows

Eligible Investors

Set Up Fee (One time)

Management Fees

Performance Fees

Risk Appetite

Description

Alchemy Leaders of Tomorrow Tranche IV

Alchemy Capital Management Pvt. Ltd.

3 to 5 years

Listed equities, PIPES, Private placements, QIP’s, Debt instruments

2 years Lock in. (Thereafter redemption Quarterly with prior notice of 15 days)

Resident Indians, NRI, HNI, Hindu undivided Family (HUF), Banks, Bodies Corporate,

Partnership Firm, Trusts & FPI

Up to 2.25% of the invested amount

2.50% per annum on Net Assets Value

Nil

High Risk

PRODUCT OPPORTUNITY

V I

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Allocation across Market Cap may range between

Equity ByMarket Cap

Large Cap

Mid Cap

Small cap

Alchemy High Growth PMS


• The strategy aims at generating long term returns by

investing in equities and equity related instruments

across market capitalizations, with a Mid cap bias.

Investment Suitability

• Suitable for an investor who is looking to participate in

India growth story through equities.

• Seeking High Risk-High return portfolio.

• Ideal investment horizon is 3 to 5 years.

About the Strategy

• A multicap approach which allows Flexibility in stock

Selection.

• Diversified Portfolio with maximum 25 stock ideas with

the option of being overweight in certain stocks.

• Alchemy Investment Philosophy is “Growth at

Reasonable Price”. The Approach is rooted in the

hypothesis that India is a high growth economy and the

best way to play this is to identify and invest in

companies which are best equipped to take advantage

of emerging domestic and global opportunities

Weight in Portfolio

Definition Cut off for CY 2018

25-100%

0-75%

0-20%

Market capitalization of 100th stock in S&P BSE 500 is the cut off for large cap

Market capitalization between 101st and 400th stock in

S&P BSE 500 is the cut off for Mid cap

Market capitalization below 400th in S&P BSE 500

`29,918 Crs and above

`3,962 Crs to `29,918 Crs

Below `3,962 Crs


Note: Market capitalization cut off will be taken from S&P BSE 500 as on 31st December (i.e. end of every calendar year)

for succeeding calendar year

The investment objectives, allocation are indicative and there are no assurances that it will be achieved.

Investors are advised to take independent tax, legal, risk, financial and other professional advice.


PRODUCT OPPORTUNITY

V I

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Note: The investment objectives, allocation are indicative and there are no assurances that it will be achieved.

Investors are advised to take independent tax, legal, risk, financial and other professional advice.


Alchemy High Growth Select Stock PMS


• The strategy aims at generating long term returns by

investing in equities across market capitalizations,

with a Mid cap bias and concentrated portfolio of

between 8-12 stocks

Investment Suitability

• Suitable for an investor who is looking to participate in

India growth story through equities.

• Long term investment horizon, Ideal investment

horizon is 3 to 5years (Minimum 3 years)

• High Risk : High return strategy

Allocation across Market Cap

• Since portfolio is concentrated, focus is more on stock

selection than on market cap allocation

About the Strategy

• Bottom up stock picking and High conviction: AHGSS

strategy plays to Alchemy’s strengths in bottoms up

research and stock picking. Investment team at

Alchemy has demonstrable long term track record of

finding winners.

• Over diversification dilutes returns: Markets are

cyclical, oscillating between bull, bear and

sideways/consolidated phases over time. A

concentrated portfolio helps to focus more on

individual stock performance and returns somewhat

reducing the correlation to broad market index returns

albeit, over the long run. While in the short to medium

term (typically less than 3 years), the portfolio returns

could trend with the market, a concentrated portfolio

of stocks, if well selected, has higher probability to

outperform the markets.

• A differentiated strategy for UHNI, FO & large

allocators: A slice of the capital allocated to a

concentrated strategy makes eminent sense as the

investor is already diversified and differentiated

strategy can help generate differentiated returns

PRODUCT OPPORTUNITY

V I

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Unifi: Business Consolidation After Disruptions (BC AD)

Investment Theme

Currently, a number of factors are at work in India

triggering a shift from unorganized to organized:

• Regulatory Changes- Demonetization & GST triggering

formalization of businesses by cash reduction in system

and destination-based taxation.

• Demographics-50% of Indian population is less than age

of 25 and 65% is below age of 35. Business sectors which

derive demand from young population are growing

exponentially.

• Urbanization- 31% population of India is urban. Indian

population is growing at 2% per year while this figure of

urban population is in double digits. The sectors

catering to urban market is witnessing growing

demand.

• Consumer behaviour- A burgeoning middle class and

increase in per capita income is leading to increasing

preference for branded goods and value-added

products.

• Technology-With technology implementations,

organized players are able to cater to customers in

more efficient manner than unorganized players

causing the demand shift towards organized players.

In BC AD, Unifi will look to create a portfolio of 15 – 20

stocks from sectors which will be biggest beneficiaries of

this shift from unorganized to organized over the next 3 – 5

years.

• Some of the features that these companies would

have:

a. Belong to sectors with high contribution of

unorganized segment

b. Selected from amongst the leaders within the sector

c. Have high operating leverage

• Average market cap of the portfolio is expected to be

around `5,000 Crs and no exposure would be taken to

Banks, IT, Oil or Pharma hence providing a

differentiation to existing client portfolios

Universe of Ideas: Work in Progress

• Building Materials: Plywood, Laminates, Sanitary ware

• Aftermarket Auto ancillaries and Batteries

• Consumer electrical

• Healthcare & diagnostics

• Moulded plastics (Furniture & Luggage)

• Pumps and B2C Engineering products

• Branded retailing and garments

• Footwear & apparels

• Logistics & warehousing

No Banks / IT/ Oil / Pharma that constitute2/3rd of Sensex / Nifty / Midcap indices

PRODUCT OPPORTUNITY

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Product commercials:

• ONLY FIXED FEE

1. Tenure of 5 years or 200% absolute return whichever

is earlier.

2. Management fee of 2% p.a. of the AUM will be

charged on a monthly basis on the last working day

value

OR

• PROFIT SHARE

1. Tenure of 5 years or 200% absolute return whichever

is earlier.

2. Management Fee of 1% p.a. of the AUM will be

charged

3. Unifi share of profit will be 20% of profits above 12%

p.a. compounded return

4. Profit share is payable only on exit

5. Unifi will adjust the Management Fee with the profit

share and hence it is NOT both

6. In case of pre-closure, the hurdle rate will be

reduced from 12% p.a. to 10% p.a. and fee offset

benefit is not available

Fund Name

Note: Data as on 30th April 2018


Year of

InceptionCAGR Correlation

Ann. Standard

Deviation

Event Arbitrage

Sector Trends Large Cap

Delisting*

Insider Shadow*

DVD*

Holdco*

Spin Off

BPJ 20*

Green Fund*

Blended Fund

2002

2011

2009

2010

2013

2014

2014

2015

2017

2017

14.99%

20.09%

43.00%

16.65%

41.04%

48.44%

27.24%

26.35%

29.12%

27.35%#

0.05

0.85

0.62

0.89

0.74

0.67

0.76

0.82

0.80

0.93

8.47%

15.51%

14.54%

20.91%

19.05%

29.23%

20.39%

18.97%

15.43%

18.75%

*Closed for Subscription

Flat Return #

PRODUCT OPPORTUNITY

V I

45

Accuracap Alphagen PMS

Accuracap Alphagen is a long only multi-cap PMS which

does stock selection based on fundamental and technical

parameters using a proprietary Artificial Intelligence

based algorithm.

Broad overview of the model

• A proprietary ranking algorithm conducts “Spatio-

temporal” analysis of every business i.e. assessment of

the business relative to its rank within the sector and

across sectors both at the current point in time and

over historical periods as well.

• This is used to narrow down the list to select high

quality businesses which are then bought at

“reasonable valuation” using a proprietary Data Model

• Post this, equi-weight portfolios of such businesses are

created. Key strategy is to hold on to winning ideas and

weed out losers at regular intervals based on the

concept of spatial – temporal analysis with very limited

scope envisaged for manual intervention.

Underlying Philosophy

• Stock Universe - Top 800 companies in terms of market-

cap:

a. Arrived at by starting with the 1000 largest

companies listed on BSE/NSE.

b. From those, following exclusions are made:

i. All PSU companies, Any company from sectors

tightly regulated by the government (example

fertilizers, sugar etc.), Companies with

questionable corporate governance track record

ii. Of what’s left, top 800 by market cap companies

are then picked.

Spatio – temporal Analysis

• Based largely on Fundamentals - All companies are

assessed on the basis of 18 parameters. Broadly these

can be divided into 2 main segments:

a. Growth and Value – Backward looking parameters –

aim at determining how a company stacks up vis-à-

vis other companies in the same sector, other

industries as well as its own history on business

operating metrics such as growth in revenues,

profits, cash-flows etc.

b. Core Strength and Risk – Forward looking, used to

assess a company’s ability to show continuance of

business outperformance and momentum. These

evaluate each business in terms of various margins

and RoCE, for strength of balance sheet,

competitive intensity, solvency and liquidity – both

relative to its own history as well as peers. These

also include non-quant factors such as corporate

governance, quality of stated earnings, adverse

market developments etc.

Note: Please refer the Private Placement Memorandum

(“PPM”) issued by the fund carefully to understand the

nature of investment and the various risks involved in the

said investments.


Raman Nagpal: Co-Founder & CIO – A Computer Scientist,

Serial Entrepreneur and Business Executive. Raman has a

deep back ground of technology and finance. Before

pursuing investment full time, he was at Adobe Systems

for 13 years where he was running a $200 Million global

business.

Raman holds a Bachelor in Computer Science from Delhi

Institute of Technology and a Masters in Computer Science

from BITS Pilani. He also earned a Masters in International

Business and is a Chartered Financial Analyst. He is a

certified Corporate Director from Insead Business School.

He has over 20 years of experience of investing in Indian

markets and running global businesses–large enterprise as

well as his own start-ups.

PRODUCT OPPORTUNITY

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Team Track-Record

3M

-2.0%

-2.0%

6 M

3.1%

3.9%

1Yr

11.3%

15.9%

3Yr

15.7%

12.0%

5Yr

21.6%

15.3%

Since Inception

25.4%

17.1%

Alphagen Inception Date: 31st December 2015

Period

Alphagen

BSE 500


Terms

Scheme Name


Investment Managers

Benchmark

Portfolio size (# of stocks)

Minimum Commitment

Set Up Fee (One time)

Management Fees

Performance Fees

Other charges

Exit Load (as a % of

current investment

value)

Description

Alphagen

The objective of the strategy is to achieve capital appreciation by investing through

a diversified Combination of Large, Mid and Small Cap Stocks across multiple sectors.

Accuracap Consultancy Services Pvt. Ltd.

BSE 500

30-40

`50 Lacs

1% of the invested amount

1.5% p.a. (charged on a quarterly basis)

20% of excess returns generated over Benchmark at the end of every FY (subject to

investment period of minimum 6 months)

Statutory/other charges as applicable (STT/Demat/GST/Custodial charges etc.)

Before completion of 1 year: 2%

After 1 year but before completion of 2 years: 1%

After 2 years completion: NIL


Note: Data as on 30th April 2018, the above performance figures are aggregate of all clients; the investor’s actual portfolio

may differ




PRODUCT OPPORTUNITY

V I

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Structured Product – An alternate to FMPs

Background

The short to medium segment of the yield curve continues

to be better placed on the risk-reward spectrum. We

reiterate investors should continue to remain invested in

short to medium term maturity instruments. This can help

in achieving relatively superior risk adjusted returns.

One such investment avenue is the “10 year Gsec Linked

MLD” which is a rated, listed, capital protected

structured product, with 10-year G-sec price as the

underlying reference asset and is suitable for investors

looking for less volatile and tax efficient investment

avenues.

Broad Features

Underlying

Capital Protection

Nature

Tenor

Digital level

Minimum Coupon*

Maximum Coupon*

Payoff

10 year Government security price (Issue date 8th January, 2018)

Principal is protected at maturity

Rated, Listed and Secured Non-Convertible Debenture

20 to 24 months

100% of closing price of underlying at initial observation date.

8.50% – 8.75% (Annualized return)

8.50% – 8.75% (Annualized return)

If underlying price on final observation date ≥ 75% of Digital level, then Payoff =

Principal + Maximum Coupon

OR

If underlying price on final observation date < 75% of Digital level but ≥ 25% of

Digital level, then Payoff = Principal + Minimum Coupon.

OR

If underlying price on final observation date < 25% of Digital level, then

Payoff = Principal

* The above mentioned coupon range is indicative. Based on the prevailing market conditions and the execution date, the levels will be finalized.

PRODUCT OPPORTUNITY

V I

48

Liquidity:

The NCD’s will be listed on BSE WDM segment. However,

the liquidity in the NCD might not be adequate or might be

non-existent.

The Investors may not be able to liquidate or sell some or

all of the Debentures as and when they require or at an

amount equal to or more than the invested amount.

Suitability:

The product is best suited for clients who want to invest

with a short term investment horizon without taking

additional risk.

The contents provided herein above are derived from Supplementary Disclosure Document

Note: Please refer the Supplementary Disclosure Document issued by the issuer carefully to understand the nature of



PRODUCT OPPORTUNITY

V I

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BOI AXA Credit Risk Fund

BOI AXA Credit Risk Fund provides a niche opportunity for

seasoned investors to participate in open ended debt

scheme which aims to provide superior risk adjusted

returns by investing in vanilla and structured corporate

credit issuances across the credit spectrum.


• The existence of vibrant debt markets is important

from macro-economic perspective to spur growth and

provide mechanisms for greater sources of financing,

liquidity and risk minimizing in an economy

• In India, while the equity capital markets have

developed significantly in terms of liquidity,

infrastructure and regulatory framework, the debt

capital markets have traditionally lagged behind

• Due to Basel norm requirements and increase in NPAs in

the banking system, banks are quite reluctant to

expand their balance sheets

• Most of the existing investors in India (banks,

insurance, pension and mutual funds) are constrained

by regulations from investing in credits rates below AA

• Lack of options in the debt market for flexible

financing has resulted in development of structured

credit markets in India

• The structured credit markets, also loosely referred as

high yield or mezzanine financing, is dominated by

holding company issuances, share backed promoter

financing, pre-IPO and real estate financing

transactions

Investment Themes

The scheme will seek to earn superior risk adjusted

returns by investing in:

• Vanilla corporate issuances across the credit spectrum

• Instruments that provide flexible, situation - specific

structured solutions to top tier, medium sized and

emerging enterprises in India

• Non-traditional debt instruments that optimize on

capital structures to meet specific needs of the issuers

• Privately negotiated debt securities of public or

private companies providing bespoke financing

solutions which may be generally be unobtainable

through broader capital markets

• Transactions whose returns are linked to growth,

profitability and valuation parameters

PRODUCT OPPORTUNITY

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Fund Snapshot

Launch Date

Fund Manager

AUM

Average Maturity

Modified Duration

Yield to Maturity

Asset Allocation

February 2015

Mr. Alok Singh - CIO

• Joined in 2012

• Over 16 years experience

• Post Graduate in Business Administration from ICFAI Business School and a CFA

`1,495 crores (as on April 30, 2018)

2.4 years (as on April 30, 2018)

1.5 years (as on April 30, 2018)

11.3% (as on April 30, 2018)

Corporate Debt (including securitized debt*) - 80% to 100% (tenor of typically 3 – 5 years)*Investments in securitized debt, will not exceed 50% of the net assets of the Scheme as at the time of Purchase

Money market instruments: 0 to 20%The Scheme will not invest in dated Government Securities and State Development LoansFund may also invest up to a maximum of 25% in unrated securities

T+10 business days

Portfolio Construct as on April 30, 2018

Source: AMC Newsletter

PRODUCT OPPORTUNITY

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Key Risk Factors

• Credit risk: Default Risk, Risk of delayed servicing &

Downgrade/Migration Risk

• Valuation risk: Due to the Illiquid nature of some

securities in Portfolio, it will be valued on mark to

model basis which could result in some divulgence

between the realizable value and the holding price of

the security

• Potential lack of investment opportunities: There is

no assurance that the Fund Manager will be able to:

a. Fully invest the corpus of the Scheme as per the


b. Realize their values at maturity or earlier

• Breach in contractual obligations of the issuer: The

Scheme will seek to obtain structural, covenant and

other contractual protections with respect to the

terms of its investments as determined appropriate

under the circumstances. There is a risk that attempts

to provide downside protection with respect to

investments will not achieve their stated effect or be

breached by the Issuer

• Illiquidity risk: The illiquid nature of the securities

presents a risk of not being able to sell the security at

or near its true value.

• Prepayment/ reinvestment risk: Certain securities

may give the issuer the right to call back before their

maturity date which may arise in reinvestment risk.

Cash flows received from securities may be re-invested

at lower interest rates

• Scheme related risks: Right to Limit Redemptions,

Suspension of the determination of NAV and

Redemption of Units, Volatility of NAV

Interest rate risk

Please refer to the Scheme Information Document / Key

Information Memorandum for detailed information and

risk factors related to the Issue. Investors are advised to

consult their own tax advisor on the tax implications of

the ownership and sale of Fund and income.



investing.


PRODUCT OPPORTUNITY

V I

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IRB InvIT


• IRB InvIT as compared to a typical debt product, is a

hybrid structure, which can provide investors

reasonable cash flows coupled with an equity kicker.

Based on our analysis, a unit holder can expect an IRR

of 15%-16% from the existing 7 toll road assets and

factoring in the current market price of ̀ 83.

• This return assumes 9.50% annual growth (5% traffic +

4.50% WPI) in toll revenues (as compared to average

CAGR of ~11.4% since inception of underlying assets).

Overview

• IRB InvIT Fund is India’s first publicly listed

Infrastructure Investment Trust. It is backed by IRB

Infrastructure Developers Limited (sponsor of the

trust) and IDBI Trusteeship (trustee).

• The InvIT comprises seven income generating toll road

projects having length of 4,055 lane kms with four of

the road projects forming part of Golden quadrilateral

and one being part of East-West corridor.

• Post-acquisition of Pathankot Amritsar project

presence of IRB InvIT now increases to 6 states in India,

with average residual concession period of around 17

Years

Risk & Mitigants

• Key risks to this view would be if the annual growth in

toll revenues turns out to be much lower. Since an InvIT

does not provide any ownership rights on an asset, one

needs to be mindful that returns from an InvIT are

highly dependent on growth in toll revenue.

• IRB InvIT being the first of its kind in the country, it is

hard to forecast how the market would behave with

regards to liquidity and price discovery but going

forward once the InvIT market matures then these risks

may not be very significant.

• Risk-mitigants are provided by (1) strength of the

sponsor (2) the high quality of underlying NHAI assets

with enabling clauses in Concession agreements to

protect toll revenue, (3) right of first refusal signed

with IRB Infrastructure Developers Ltd. for their future

assets and (4) the AAA rating of the InvIT by CARE –

which will enable the InvIT to enjoy a potential spread

on leverage.

Investors

Government & Monetary Authority of Singapore

Prusik Umbrella Ucits Fund PLC/Prusik Asian Equity Income Fund

Reliance Capital Trustee Co Ltd A/C – Reliance Regular Savings Fund-balanced Option

Aditya Birla Sun Life Trustee Company Private Limited A/C – Aditya Birla Sun Life Balanced 95 Fund

Deutsche Global Infrastructure Fund

Nomura Singapore Limited

Total of top 10 investors

(%)

9.7

4.6

3.9

3.6

2.5

2.4

26.7

Top 10 Investors (Non-Sponsors)

PRODUCT OPPORTUNITY

V I

53

FY2018 Update

• IRB InvIT recorded revenue of 1,005.2 crore, EBITDA of

819.1 crore and PAT of 232.4 crore for FY 18.

• NDCF of over ̀ 650 Crore for FY2018, meets committed

payout despite 2nd quarter performance impacted by

GST rollout.

• Total Payout of 10.55/Unit for FY2018 (318 days) out of

which ̀ 7.65/unit is in the form of interest and ̀ 2.90 is

in the form of reduction of capital.

Major Unit holding Pattern as on March 31, 2018

Sponsor(s) / Investment Manager / Project Manager(s)and their associates/related parties

Foreign Portfolio Investors / Financial Institutions

Body Corporates

Individuals ( Non- institutional)

Mutual Funds

Alternative Investment Funds

Trust (Non Institutional)

(% Holding)Category

16.04

37.1

19.2

13.4

10.8

1.6

0.9

PRODUCT OPPORTUNITY

V I

54

IRB InvIT stock price


Note: This note has been prepared for your information only. You are advised to carefully read the entire offer document

including all the risk factors, issued by the Issuer before making any investment decisions.

Source: NSE

PRODUCT OPPORTUNITY

V I

55

Leveraged Investment in IRB InvIT

Investment Rationale & Opportunity

• IRB InvIT as compared to a typical debt product, is a

hybrid structure, which can provide investors

reasonable cash flows coupled with an equity kicker.

Based on our analysis, a unit holder can expect an IRR

of 15%-16% without leverage and 17-18% with leverage,

from the existing 7 toll road assets and factoring in the

current market price of Rs 83.

• This return assumes 9.50% annual growth (5% traffic +

4.50% WPI) in toll revenues (as compared to average

CAGR of ~11.4% since inception of underlying assets).

• At the time of its IPO in May 2017, IRB InvIT was

expected to generate an IRR of ~12%. Since then,

however, the InvIT has been trading at a discount hence

providing a higher yield. Gradually as the market has

become more familiar with this product, we have seen

an increase in demand. As product awareness increases

and the market for InvITs in India matures, we expect

this discount to reduce further.

• An investor can enhance the overall IRR by 2-3% by

opting for leverage for an amount upto 45% of the total

investment. For example, an exposure of 1 Cr can be

taken by investing ̀ 55 Lakhs of own funds and availing

leverage of ̀ 45 lakhs.

Sr. No.

With 45% Leverage

Principal Loan

repayment

Outflow

(Own Funds)Inflow^

Absolute

ReturnMultiplier Gross IRR

1

2

Quarterly

Back ended at the

end of the tenure

1 Cr

1 Cr

7.7 Cr

7.5 Cr

675%

652%

7.7X

7.5X

17.0%

17.9%

^Inflow is the summation of all the cash flows during the concession period of the toll road assets.

Note: All our IRR and return calculations are based on estimated cash flow of the seven SPVs of the InvIT and may change

due to various reasons such as lower revenue growth due to lower traffic growth & WPI, change in tax laws, natural

disaster etc.

Above return calculation is based on 10% lending interest rate which may vary depending on market conditions, 0.50%

processing fees and tenure of 5 years.

Loan Facility details

• There are two Principal repayment options if one wants to avail for leverage

1. Repay the Principal quarterly through the distributions made by the InvIT

2. Repay the Principal at the end of the loan tenure

PRODUCT OPPORTUNITY

V I

56

Please note

1. Interest rate on loan may get reset on a quarterly basis

2. Lender will have a quarterly call/put option for the loan

3. All cash-flows from InvIT will be escrowed


This note has been prepared for your information only. You are advised to carefully read the entire Offer document

including all the Risk Factors, issued by the Issuer before making any investment decisions.


Nature of Facility

Interest Frequency

Processing Fees

Tenor / Final Maturity

Put/call option

Principal repayment

Mechanism

Security (Collateral

offered)

Source of Repayment

Loan against units of IRB InvIT

Monthly

0.5% (payable quarterly through the life of funding)

3 years

Quarterly

Quarterly / back ended

First and exclusive pledge over unencumbered listed units of IRB InvIT in favor of

JMFPL equivalent to minimum two times the facility amount

Quarterly payouts received from IRB InvIT to be escrowed and adjusted against

outstanding loan and/or client’s own funds

PRODUCT OPPORTUNITY

V I

57

Indiabulls Dual Advantage Commercial Asset Fund

Indiabulls Dual Advantage Commercial Asset Fund is a 5

(+1+1) years, closed-ended Category II AIF

Investment Thesis

• Landlord Favorable Market: Since 2016, major

markets in India in commercial real estate space have

turned landlord favorable due to:

a. Limited Inventory: Post Global Financial Crisis 2008,

developers preferred residential over commercial

developments leading to a reduction in Grade A

office space supply

b. Stable Absorption: Revival in the economy post 2014

led to increased absorption in select micro-markets.

Indian office market saw an absorption of 42.8

Million. sq. ft. in 2017.

c. Low Vacancy: Overall vacancy in major micro

markets of Hyderabad, Bangalore and Pune has

reached as low as 3%-5%.

• Future Growth: Low vacancy levels, stable absorption

and limited inventory are expected to lead to

increased rentals going forward.

• Institutionalization of Office Real Estate: Sector

opened for REITs, FDI investors and domestic insurance

companies

Broad Investment Philosophy/ Strategy of the fund

• Investments in Grade A pre-leased office or

commercial mixed use assets in top cities such as MMR,

Bengaluru, Pune, Hyderabad, Chennai, NCR and

Kolkata

• Grade A commercial assets by leading developers with

excellent tenant quality and long lease tenure

a. Downside Protection through recourse to completed

asset

b. Opportunity to bring in rental to market parity

and/or reposition asset to achieve higher rentals

• Opportunity to capture higher returns through

leverage and achieving rental efficiency through re-

negotiating

• Expected capital appreciation at the time of sale due

to yield compression

• Investment risks balanced with fixed rental returns and

capital appreciation on exit

• Last mile funding to developers for construction

completion or to replace existing lenders (Upto 40%)

Note: Please refer the Private Placement Memorandum

(“PPM”) issued by the fund carefully to understand the

nature of investment and the various risks involved in the

said investments.

Opportunity

Lower risk real estate opportunity: Investments in Grade A

office or commercial mixed use assets which are

completed, pre leased, have lease commitments while

nearing completion by leading developers with excellent

tenant quality and long lease tenure

• Diversification through fund-route: Taking exposure

via a fund route allows investors to take exposure in:

a. Assets outside their home market such as MMR,

Bengaluru, Pune, Hyderabad, Chennai, NCR and

Kolkata

b. Higher priced assets with ticket size of 100 – 200

Crores (space where the fund would be focusing)

c. Benefit from institutionalized exits via REITS, FDI

Investors and Insurance companies

• These factors also help in mitigating risks like

vacancy and exit associated with owning rental yield

assets

Current Update: Fund has invested in a pre-leased office

asset in Gurgaon and another deal is in advanced stage in

Hyderabad

PRODUCT OPPORTUNITY

V I

58

Key Terms

Term

Fund Size

Fund Tenure

Structure

Target Returns

Contribution

Hurdle Rate

Set up Fees

Description

500 crores (with a green-shoe option of 500 crores)

5 years (+1 +1 year)

SEBI AIF Category II

~17% Gross IRR at the portfolio asset level

50% of Commitment Amount

10% pre-tax

2% of the capital commitment

Fee Structure Unit Class Management Fee Carried Interest

`1 Crore and less than

`10 Crore


`25 Crore

`25 Crore and above


`10 Crore


`25 Crore

`25 Crore and above

Class A1

Class B1

Class C1

Class A2

Class B2

Class C2

2.00%

1.75%

1.50%

1.50%

1.25%

1.00%

NA

10%


Note: Please refer the Private Placement Memorandum (“PPM”) issued by the fund carefully to understand the nature of



59

Appendix I

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All recipients of this document must before investing must make their own investigation and apply independent judgment based on their specific investment objectives and financial position and seek appropriate professional advice from their own legal and tax consultants, advisors, etc. as to the risks and investment considerations arising from an investment product and should possess the appropriate resources to analyze such investment and the suitability of such investment to such investor’s particular circumstances before making any investment. The Investor is solely responsible for any action taken based on this document. JMFS shall not be liable for any direct or indirect losses arising from the use of the information contained in the document and accept no responsibility for statements made otherwise issued or any other source of information received by the investor and investor would be doing so at his/her/its own risk. The information contained herein should not be construed as forecast or promise or guarantee or assurance. The investors are not being offered any assurance or guaranteed or fixed returns. In rendering this information, JMFS assumed and relied upon, without independent verification, the accuracy and completeness of all the data that was publicly available. JMFS does not warrant the accuracy, reasonableness and/or completeness of any information mentioned in this document. JMFS takes no responsibility of updating any data/information in this document from time to time. JMFS, its affiliates/associates and any of its directors, officers, employees and any other persons associated with this shall not be liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this document in any manner whatsoever and shall not be liable for updating the document. Past performance is not necessarily indicative of future returns. The investment objectives, allocation mentioned herein are indicative and there are no assurances that it will be achieved.

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60

Appendix II

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• All of the views expressed in this research report accurately reflect his or her or their personal views about all securities; and• No part of his or her or their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research report.

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In rendering the information in this report, JMFS assumed and has relied upon, without independent verification, the accuracy and completeness of all information that was publicly available to it. The information has been obtained from the sources it believes to be reliable as to the accuracy or completeness. While reasonable care has been taken in the preparation of this report and the information is given in good faith, it does not purport to be a complete description of the securities, markets or developments referred to herein, and JMFS does not represent or warrant its accuracy or completeness. JMFS may not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This report is only intended for the selected recipients. This report is provided for information purpose only and is not an investment advice and must not alone be taken as the basis for an investment decision. The investment discussed or views expressed or recommendations/opinions given herein may not be suitable for all investors. Past performance is not necessarily indicative of future returns. You are advised to make your own independent judgment based on your specific investment objectives and financial position and using such independent advisors as necessary, with respect to any matter contained herein.

61

Trading recommendations based on quantitative analysis are based on index/securities’ momentum, price movement, trading volume and other volatility parameters, as opposed to study of macro-economic scenario. The trading calls and/or contents of this document are not made with regard to the specific investment objectives, financial situation or the particular needs of any particular person. The user must know and appreciate that dealing/investment in securities market have varying element of risk and it is generally not an appropriate avenue for someone with limited resources/ limited investment and/ or trading experience and low risk tolerance. The user should, therefore, consult its own advisors to determine the merits and risks of investing in securities market. The user should carefully consider whether trading in securities market is suitable for him/her in the light of his/her financial condition. Any action taken by the recipient based on the aforesaid report and suffers adverse consequences or loss, he/she/it shall be solely responsible for the same. We expressly disclaim any liability and responsibility for any losses arising from any uses to which this communication is out and for any errors or omissions in this communications and JMFS and its affiliates/associates / employees and directors shall not be responsible, in any manner whatsoever, for the same.

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62

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