M F P O I N T E R For Private Circulation only

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1 M F P O I N T E R For Private Circulation only Issue - 86 February, 2013 ELSS- Do not Ignore this option Benchmark Global Indices Closing 16-Jan-12 to 15-Feb-13 Bovespa 57, CAC 40 3, DAX 7, Dow Jones 13, FTST 100 6, Hang Seng 23, Nikkei , Shanghai Composite 2, Equity Market Global Equities For the month ended 15th, global equity indices ended on a positive note after Fiscal cliff in the US was averted. In US, the benchmark index S&P 500 was up by more than 6 per cent this year owing to strong corporate earnings so far in Data reported across US was also positive, in which manufacturing in New York State expanded for the first time in seven months and consumer sentiments rose from the prior month and beat expectations. The United States has nearly touched its $16.4 trillion debt ceiling in the starting of the year and is now employing special measures to meet its financial obligations. The US House has temporarily suspended the review of the measures to be taken until 19 May, 2013 before reaching a decision on the debt ceiling. However, preference would be given to spending cuts before the March 27 deadline for funding of government agencies and programs. Despite posting an increase in trade surplus at 11.7 billion ($15.6 billion) by euro zone (in December 2012), signs of euro zone slipping deeper into recession were seen in the fourth quarter GDP data (-0.6%) thereby increasing the likelihood of an ECB rate cut this year. As rise was witnessed in factory orders and industrial production (in December 2012) coupled with encouraging signs from business surveys, economists believe that euro zone could show some signs of stability in the first half of On the commodity front, crude oil prices increased to $118 a barrel for the month ended 15th February, Strongerthan-expected drop in U.S. jobless claims and fears on US gasoline supply pulled U.S. crude markets higher. Gold declined by $70 per ounce and closed at $ during the month on the upbeat view of world growth and declining investor commitment (leading to decline in volumes a low not seen since August 15, 2012). Smart investing starts here (continued on page 2) 1

2 Domestic Markets: Domestic indices for the month ended 15th Feb 2013 closed on a weaker note with Sensex and Nifty down by 2.6% and 2.8% respectively. Both indices had peaked at the end of Jan 2013 after the RBI reduced the Repo and CRR rate in its monetary policy meet. Also inflation slowed to 6.62% in January from 7.18% a month ago, boosting chances of further policy rate cuts by the central bank to support sluggish growth. Indian exports grew by 0.8% while imports grew by 6.1% to reach all-time high of $45.6 billion in January India's trade deficit widened to $20 billion in January 2013, an increase of 13.8% on y-o-y basis. In order to reduce the subsidy burden and thereby deficit, the government allowed partial deregulation of diesel prices. It allowed Oil marketing companies (OMC's) to hike diesel prices over a period of time until they recover ` 9.60 per litre loss. Industrial production (IIP) fell for the second straight month in December 2012 to 0.6%. Sentiments across investors remained cautious ahead of Budget on Feb 28th 2013 amid fears of populist specialist measures that could threaten the government's fiscal deficit target. Rupee appreciated significantly against the dollar to close at `54.22 a dollar from `54.62 against dollar in the last month on account of late inflows related to foreign funds selling dollars. FII's continued to be net buyers in equities to the extent of `18,900cr while Mutual funds were net sellers to the extent of `17,058cr for the period 15th Jan-14th Feb, Bond Market Indian bond prices edged up at the end of the month after yields fell to their lowest in a month (below 8%) as inflation eased to more than a three-year low (6.62%), raising expectations the central bank may ease rates when it meets in March. Yields on the 8.15% GOI 2022, 10-year benchmark paper declined by 5 basis points to close at 7.83% on 15th February 2012 in comparison to 7.88% a month earlier. 2 Smart investing starts here

3 *Returns as on 15-Feb-2013 Category Returns: For the one month ended 15th Feb 2013, major equity sector funds were in the negative territory. Except for MIP and Balanced Debt funds, all debt categories were in the positive category which was majorly due to the rate cut by RBI and expectations that further rate cut was possible as inflation had fallen in January Top 5/Bottom 5 Equity Schemes Top Performers Under Performers Absolute Absolute Scheme Name Return(%)* Scheme Name Return(%)* SBI FMCG Fund 1.54 Reliance Infrastructure Fund SBI Infotech Fund 0.82 Escorts Tax Franklin Infotech Fund 0.40 HSBC Midcap Equity Fund Tata Grow Economies Infra Fund-A 0.27 Sundaram S.M.I.L.E Fund DSPBR World Agriculture Fund 0.10 Sahara Star Value Fund Debt Schemes Top Performers Under Performers Annualised Annualised Scheme Name Return(%)* Scheme Name Return(%)* Sundaram Gilt Fund ICICI Pru Moderate-Reg PineBridge India Treasury Fund ING Income Gth Multi FoF-30%-A Canara Rob Dynamic Bond Fund 9.33 IDFC Asset Alloc-Mod-Reg Escorts Liquid Plan 9.28 FT India Life Stage FOFs Taurus ST Income 9.26 Birla SL Asset Alloc-Cons *Returns as on 15-Feb-2013 Smart investing starts here 3

4 ELSS- Do not Ignore this option It is again the time of the year when one has started looking at the Tax saving options which are available to them. Tax Saving schemes of mutual funds have off late not been performing too well and there has been a general perception that the returns have been lesser than PPF and at times even negative. Given this scenario, we thought of doing a detailed analysis on the tax saving funds and would like to share with you the findings. Options available for Tax saving under section 80C of the Income Tax Act Investments Returns Investment Liquidity Horizon PPF 8.8 % (Tax Free) 15 years Withdrawals after fifth year 5 year Bank FD's 8-9 % (Taxable) 5 years Lock in for five years NSC 8.60 % (Taxable) 5 or 10 years Lock in for five or ten years ELSS Market Linked (Tax Free) 3 years Locked in for three years ULIP Market Linked (Tax Free) Till Maturity Locked till plan matures NPS Market Linked (Taxable) Till Retirement Locked till Retirement Insurance policies 6-7% (Tax Free) Till Maturity Locked till plan matures Note: - Also Included under section 80C are expenses of Housing loan repayment (Principal amount of EMI is eligible for deduction) and School Fees (Tuition Fees of two children in a recognized educational institute) Performance of ELSS v/s other Tax Saving Schemes Particulars PPF NSC Bank FD ELSS* Risk Very Low Very Low Low High Period (Lock In) 15 years $ 5 years 5 years 3 years Returns over various periods (p.a.) 5 years 7 years 10 years 8% 8.16% 8.5% Market Linked Returns Taxation Tax Free Taxable Taxable Tax Free $ Partial Withdrawal available after 5 years *the above mentioned returns are from the period of 2002 to 2012 The above chart shows returns on various tax saving instruments over the last 5, 7 and 10 yrs period. Performance of Rs. 100,000 invested over various investment horizons 5 years 7 years 10 years Max Min Max Min Max Min ELSS* 170, , , ,903 1,324, ,307 PPF 146, , ,892 NSC (post tax) 132, , ,245 FD (post tax) 133, , ,242 * The ELSS fund mentioned above is of ICICI Pru Tax Plan 4 Smart investing starts here

5 The above returns show the maximum and minimum returns of ELSS over various horizon periods. If an investor had invested any time from 1st Feb 2007 to 31st Jan 2008 and held it for a period of five years then the maximum return generated would be a maximum of `170,489 (invested on 5th March 2007 and held for 5 years) and minimum would be `119,228 (invested on 2nd January 2008). Same way if the investor had invested for a longer period of time i.e. 10 years the returns are substantially higher when compared to PPF as can be seen from the chart above. The maximum returns being `13,24,424 (invested on 28th October 2002 and held for 10 years and the minimum being `9,34,307 (invested on 26th February 2002). The minimum return being nearly 4.3 times more than what you would earn in a PPF. SIP Investment over a horizon of 5, 7 and 10 years SIP Return - XIRR 5 years (%) 7 years (%) 10 years (%) Scheme Name Max Min Max Min Max Min HDFC TaxSaver ICICI Pru Tax Plan HDFC Long Term Adv Fund Franklin India Taxshield If any particular client had started an SIP, in the example above, we have assumed an investment in ICICI Pru Tax plan before five years i.e. any day from 1st Feb 2007 to 31st Jan 2008, the investment would have given maximum CAGR of 16.74% p.a. and a minimum of 7.76% p.a. (time horizon of the investment being 5 years). The maximum CAGR for 10 years works out to 24.99% p.a. and minimum being 19.66% p.a. Performing ELSS Funds (in existence for more than 10 years) Scheme Name NAV Corpus 3 Yrs 5 yrs (%) 7 yrs (%) 10 yrs (%) Star ^ (`)# ( ` cr) (%) Rating CAGR Max Min$ Max Min Max Min HDFC TaxSaver ICICI Pru Tax Plan HDFC Long Term Adv Fund Franklin India Taxshield Taurus Tax Shield Fund # NAV as on 6th Feb 2013 ^ Value Research Star Rating $ Max & Min returns are for the period mentioned above Conclusion It may seem that we are comparing apples and oranges. However, if one looks at a longer term horizon, the risk of equity reduces with time. We would advise that some part of the tax saving limit available under section 80C should also be allocated towards ELSS and should not be ignored despite the present market conditions. Smart investing starts here 5

6 Know Your Report In this issue, we are covering Dividend Detail Report which gives details of the individual's dividend history categorized across various schemes in the form of Dividend Reinvestment and/or Dividend Payout. This report is helpful to keep a track on all the dividends received by the investor for a given period. Also useful at the time of filing income tax returns. Table 1 Once the client logs under the Mutual Fund section the below headers are visible. Under the Profit/ Loss menu a client can click on Dividend Detail Report. The below window would open Table 2 1. Select period from date to date. 2. Click on SHOW REPORT icon. The below report shows dividend details of various schemes invested by the client with the dates on which the dividend is declared along with the dividend earned. 6 Smart investing starts here

7 The above snapshot shows the total dividends earned Scheme wise and the consolidated total across all schemes in the form of Dividend Reinvestment and/or Dividend Payout. The same report is available in Summary format also in the Profit/ Loss Menu as below. Table 3 Once you click the Dividend Summary Report the below page opens Client can click steps under Step 2 and get the below report after clicking the SHOW REPORT icon. This page only shows the total dividends Scheme wise and the Grand Total is shown across all schemes in the form of Dividend Reinvestment and Dividend Payout. Smart investing starts here 7

8 Performing Mutual Fund Plans Scheme Name Corpus NAV (`) Annualised % ( ` Crs)# Gr Div 1 mth 3 mths 6 mths 1 yr Income Funds Birla SL Dynamic Bond Fund HDFC High Interest-STP Ultra Short Term Plan HDFC Cash Mgmt-TA Plan Reliance Money Manager Fund Tata Floater Scheme Name* Corpus NAV (`) 6 mths 1 yr 3 yrs 5 yrs (` Crs)# Gr Div (%) (%) (%) (%) Hybrid - Monthly Income Plans(MIPs) Birla SL MIP II-Savings Reliance MIP Balanced Fund HDFC Prudence Fund Equity - Large Cap DSPBR Top 100 Equity Fund Franklin India Bluechip Fund HDFC Top 200 Fund ICICI Pru Dynamic Plan ICICI Pru Focused BlueChip Eq Fund Equity - Multi cap Birla SL Dividend Yield Plus HDFC Equity Fund IDFC Premier Equity Fund-Reg Reliance Equity Opportunities Fund UTI Dividend Yield Fund Equity - Midcap DSPBR Small & Mid Cap Fund HDFC Mid-Cap Opportunities Fund ICICI Pru Discovery Fund SBI Emerging Businesses Fund Sundaram Select Midcap Equity - Thematic HDFC Infrastructure Fund Reliance Banking Fund Reliance Pharma Fund Tax Saving Scheme(ELSS) HDFC TaxSaver ICICI Pru Tax Plan Sensex 19, Nifty 5, *Returns for less than 1 year is absolute (in case of MIP, it is annualized) and more than 1 year are compounded annualized as on 15th. #Corpus as on December 2012 as AMFI has mandated for quarterly AUM declaration. This document is solely for private circulation only. Mutual funds like securities investments are subject to market risks and other risks. Investors are advised to read the offer document before investing. Corporate Office Address : A1, Kailash Industrial Complex, Park Site, Off LBS Marg, Vikhroli West, Mumbai Tel: mutualfunds@ventura1.com Website : 8 Smart investing starts here