Model Portfolio update

July 22, 2015 LatestDeal Team Model – PortfolioAt Your Service

Large cap Midcap

Name of the company Weightage(%) Name of the company Weightage(%) Consumer Discretionary 12 4 Consumer Discretionary 34 DVR 4 Bosch 6 2 Bata India 6 Titan 2 Arvind 6 BFSI 29 HDFC 7 8 HDFC Bank 7 Castrol 8 SBI 8 BFSI 14 7 CARE 6 Power, Infrastructure & Cement 15 IndusInd Bank 8 L & T 8 UltraTech Cement 7 FMCG 8 FMCG 7 KiKansai NlNerolac 8 ITC 7 Pharma 12 Metals & Mining 4 6 4 Torrent Pharma 6 Oil and Gas 6 ONGC 6 Media 8 Pharma 7 PVR 8 Lupin 3 Capital Goods 6 Dr. Reddy's Lab 4 6 IT 15 6 Realty/Infrasturcture/Cement 18 TCS 6 Star Ferro & Cement 6 3 Container Corporation of India 6 Telecom 3 Shree Cement 6 3 Total 100 Media 2 Zee Entertainment 2 Total 100 • Diversified portfolio has 70% weightage to large cap and 30% to midcap • Exclusion- Portfolio • Inclusion – Dr. Reddy’s Lab

Source: Bloomberg, ICICIdirect.com Research OutperformanceDeal Team – At continues Your Service across all portfolios…

• Our indicative large cap equity model portfolio (“ Quality-20”) has • We continue to remain underweight on oil & gas with our only pick being continued to deliver an impressive return (inclusive of dividends) of 87% ONGC, which has a better risk-reward (muted RoIs from unrelated since its inception (June 21, 2011) vis-à-vis the index return of ~60% investments could impact the former while the latter has reducing during the same period, an outperformance of ~27%. This validates our regulatory challenges). We continue to remain neutral on pure play thesis of selecting companies with sound business fundamentals that defensives (IT, FMCG) as secular earnings coupled with sector rotation form the core theme of our portfolio. Our midcap portfolio (“Consistent- could lead to consolidation in near term valuations and offer stock specific 15”) outperformed the benchmark by ~1.8x since June 2011. Our opportunities. We remain positive on auto, pharma, financials, capital consistent outperformance demonstrates our superior stock picking ability goods and infrastructure as markets in H1CY15 aligned to our view of favourable risk-reward, good • Among individual names, we are strongly overweight on L&T and franchisee vs. reward-at-any-risk businesses. Some key performers of our UltraTech in the infra space while we prefer Axis Bank and SBI among portfolio are Lupin, Axis Bank and TCS in the large cap portfolio while financials Natco Pharma and Shree Cement have delivered stupendous returns in House view on Index the midcap portfolio • Factoring in the fall in inflation, comfortable CAD, improved sentiments • We have always suggested the SIP mode of investment and still find a lot and pick-up in GDP growth, we expect Sensex EPS to grow 18.3%, 18.2% of merit in it as the preferred mode of deployment given the market to | 1608 and | 1901 during FY16E, FY17E, respypectively( CAGR of 18% conditions and volatility associated since the inception of the portfolio. It over FY15-17E). A pick-up in earnings could see the index get further re- has outperformed other portfolios, thus, reinforcing our belief in a plan of rated. Hence, we assign a P/E multiple of 16.5x on FY17E EPS to arrive at investment. However, now we are also advising clients to look at lump a fair value of 31400 by end CY15 with the Nifty reaching 9400 sum investments on any possible dips Strategy 2015 - Sensex & Nifty Target • On a YTD basis, the markets have been consolidating in a broad range of FY14 FY15 FY16E FY17E 8000-8800 on the Nifty. This is owing to a) markets awaiting a turnaround Sensex EPS 1365135916081901 on the ground and, hence, corporate earnings and b) taking a breather post a stupendous rise witnessed in CY14, wherein valuations in some Growth (%) 17.1% -0.4% 18.3% 18.2% areas were ahead of fundamentals. Going ahead, in the medium term, Target Multiple 16.5x stocks with reasonable earnings visibility and valuations should do well Sensex Target - December 2015 31400 and will find flavour among investors Corresponding Nifty Target 9400 • We have made a minor change to our portfolio by replacing Sun Pharmaceuticals with Dr Reddy’s Laboratories. Sun Pharma’s first post- RbRanbaxy guidance reflects short to mid-term hdidheadwinds. Th hough thhe management expects growth to normalise from FY17 onwards, its own revised assessment suggests that the hitherto seamless journey of the company may be a thing of past as it prepares to fathom Ranbaxy integration and Halol type compliance issues. In this backdrop, we advise portfolio investors to switch to Dr Reddy’s that, at this juncture, remains a more stable option in the large c ap pharma space besides Lupin Performance*Deal Team – soAt farYour … Service

Portfolio performance since inception Portfolio performance since last update (May 2015) 9 150 134.6 8.1 8 125 7 102.1 6 100 87.4 75.7 5 % 75%% 60.5 62.7 4 333.3 3.0 3 2.2 2.4 50 2 0.8 25 1 0 0 Large Cap Midcap Diversified Large Cap Midcap Diversified Portfolio Benchmark Portfolio Benchmark • The large cap equity model portfolio-“Quality-20” continued to heavily • Since the last update, our large cap portfolio has lagged the index mainly outperform the index with ~87% return since its inception (June 21, 2011) owing to sharp declines in Sun Pharma, Tata Motors and Tata Steel. vis-à-vis index return of ~60% in the same period. Our sustained Meanwhile, Zee Entertainment was the star performer delivering a return preference for high quality names has aided this outperformance on a of 21% since our last update consistent basis. We continue to be rewarded for our meticulous approach towards stock selection while we endeavour to emulate the • Our midcap portfolio delivered an outperformance of 8.1% vs. 3.3% for broader index CNX Midcap since May, 27, 2015. The key performers in the midcap portfolio were Arvind Ltd, PVR and Kansai Nerolac delivering 30%, 24% • The “Consistent-15” midcap portfolio recovered lost ground and surged and 20%, respectively, since our last update ahead of its benchmark index (1.8x Index returns) • The diversified portfolio (combination of Q-20/C-15 in a 70/30 ratio) has also outperformed its benchmark indices, given the overall outperformance of both portfolios

Source: Bloomberg, ICICIdirect.com Research TopDeal movers* Team –soAt far… Your Service

Large Cap Midcap Diversified

Top gainers Top gainers Top gainers 200 400 400 350 350 160 300 300 250 250 200 120 %) )) )) ( 150 200 (% (% 100 80 150 50 100 0 40 50 TCS

Lupin Lupin 0 0 Lupin Natco Axis Bank* Sun Shree HDFC Bank Axis Bank* Axis ent* mins mins rma* Sun Pharma* Sun ration dia* atco atco dia* ainer ainer hree osch* aa mm Pharma* Pharma* Cement* tt mm oo nn nn NN B S I Ph Ce Cu of I Con Corp

Large Cap Midcap Diversified

10 Top losers Top losers Top losers 5 30 0 0 20 -5 -8 10 -10 -16 0 -15 (%) (%) (%) -10 -20 -24 RE*

-20 dia* ma* ent* -32 ges* rr nn AA mm -30 C -40 -40 Castrol I Castrol Tata Global GAIL* Heidelberg ONGC* Tata Steel*

Wipro* Bharti GAIL* ONGC* Tata Torrent Pha Beverages* Cement* Airtel Steel* Heidelberg Ce Tata Bevera Global

Source: Bloomberg, ICICIdirect.com Research , *Starred stocks have been included in the portfolio since the last rejig in July 2012/May, August ,DecemberDecember 2013/ April, June, December 2014/ May 2015. Rest all are since inception in June 2011 Performance*Deal Team – soAt farYour in SIPService mode …

8,500,000

7,500,000 4 66 6,500,000 9,733,4 |

5,500,000 5,000,000 5,000,000 5,000,000 7,891,965 7,693,379 6,972,644 6,883,686 ,606,329 4, 500, 000 66

3,500,000 Largecap Midcap Divesified

Investment Value of Investment in Portfolio Value if invested in Benchmark

• Systematic investments at regular intervals in all our three portfolios have outperformed their respective benchmarks acting as a perfect shield tothe volatility encountered by the market in the last year • Assuming | 1,00,000 invested as SIP at the end of every month • Start date of SIP is June 30, 2011

Source: Bloomberg, ICICIdirect.com Research What’sDeal Team in, what’s – At Yourout? Service

What' ssin? in?

Name Portfolio Weight Dr. Reddy's Lab Largecap 4%

What's out ?

Name Portfolio Weight Sun Pharma Largecap 4%

Source: ICICIdirect.com Research TheDeal story Team of the– At stocks… Your Service Dr. Reddy’ s Laboratories (DRREDD) • Dr Reddy’s has developed a knack for exclusivity/FTF launches on a fairly continuous basis in the US. We expect this trend to continue further. However, the focus has now shifted to more unique launches such as OTC, complex generics, controlled releases, etc. The US traction is also likely to nullify the European slowdown. The US pipeline includes 220 filed ANDAs including 68 pending approvals • DRL, being an early mover, is well versed with the dynamics in Russia. However, recent currency volatility and political unrest have caused disturbances in an otherwise safe market. In India, growth is expected to be largely from launches in the oncology and biosimilars space besides an improvement in productivity of the enhanced field force • We expect a fall in share of low margin/high risk segments such as PSAI and European generics (especially Betapharm). Thus, growth in FY15-17E is likely to emanate from more productive and sustainable segments such as the US and India. Similarly, in terms of product offering, we envisage more launches in the fields of injectables, OTC, complex/limited competition products and biosimilars, besides legacy generics • DRL has spent around 8-9% of the turnover on R&D in the last four years but this figure is likely to touch 10-11%, going ahead. Beside ANDAs, it has also filed 10 drug applications (()NDAs) in the 505 b (2) route that are awaiting approval Key Financials FY14 FY15 FY16E FY17E Net sales 13217.0 14818.9 17062.2 19178.3 Growth (%) 36.6 12.1 15.1 12.4 EBITDA margins 25.1 23.5 23.5 24.0 PAT 2151. 3 2099. 0 2452. 5 3000. 0 PAT growth 50.8 -2.4 16.8 22.3 P/E 22.3 22.8 19.5 16.0 P/BV 5.3 4.4 3.7 3.1 RoE 23.7 19.3 19.0 19.3 RoCE 19.2 18.1 20.0 21.1

Source: Bloomberg ICICIdirect.com Research LargeDeal Teamcap portfolio – At Your Service

Earlier Now

Name of the company Weightage(%) Name of the company Weightage(%) Consumer Discretionary 12 Consumer Discretionary 12 United Spirits 4 United Spirits 4 Tata Motors DVR 4 Tata Motors DVR 4 Bajaj Auto 2 Bajaj Auto 2 Titan 2 Titan 2 BFSI 29 BFSI 29 HDFC 7 HDFC 7 HDFC Bank 7 HDFC Bank 7 SBI 8 SBI 8 Axis Bank 7 Axis Bank 7 Power, Infrastructure & Cement 15 Power, Infrastructure & Cement 15 L & T 8 L & T 8 UltraTech Cement 7 UltraTech Cement 7 FMCG 7 FMCG 7 ITC 7 ITC 7 Metals & Mining 4 Metals & Mining 4 Tata Steel 4 Tata Steel 4 Oil and Gas 6 Oil and Gas 6 ONGC 6 ONGC 6 Pharma 7 Pharma 7 Lupin 3 Lupin 3 Sun Pharma 4 Dr. Reddy's Lab 4 IT 15 IT 15 Infosys 6 Infosys 6 TCS 6 TCS 6 Wipro 3 Wipro 3 Telecom 3 Telecom 3 Bharti Airtel 3 Bharti Airtel 3 Media 2 Media 2 Zee Entertainment 2 Zee Entertainment 2 Total 100 Total 100

Source: Bloomberg, ICICIdirect.com Research MidcapDeal Team portfolio – At Your Service

Earlier Now

Name of the company Weightage(%) Name of the company Weightage(%) Consumer Discretionary 34 Consumer Discretionary 34 Bosch 6 Bosch 6 Bata India 6 Bata India 6 Arvind 6 Arvind 6 Voltas 8 Voltas 8 Castrol 8 Castrol 8 BFSI 14 BFSI 14 CARE 6 CARE 6 IndusInd Bank 8 IndusInd Bank 8 FMCG 8 FMCG 8 Kansai Nerolac 8 Kansai Nerolac 8 Pharma 12 Pharma 12 Natco Pharma 6 Natco Pharma 6 Torrent Pharma 6 Torrent Pharma 6 Media 8 MdiMedia 8 PVR 8 PVR 8 Capital Goods 6 Capital Goods 6 Cummins 6 Cummins 6 Realty/Infrasturcture/Cement 18 Realty/Infrasturcture/Cement 18 Star Ferro & Cement 6 Star Ferro & Cement 6 Container Corporation of India 6 Container Corporation of India 6 Shree Cement 6 Shree Cement 6 Total 100 Total 100

Source: Bloomberg, ICICIdirect.com Research DiversifiedDeal Team portfolio – At Your (1/2) Service

Earlier Now

Name of the company Weightage(%) Name of the company Weightage(%) Consumer Discretionary 19 Consumer Discretionary 19 UitdUnited SiitSpirits 3 UiUnite d SiiSpirits 3 Tata Motors DVR 3 Tata Motors DVR 3 Bajaj Auto 1 Bajaj Auto 1 Titan 1 Titan 1 Bosch 2 Bosch 2 Bata India 2 Bata India 2 Arvind 2 Arvind 2 Voltas 2 Voltas 2 Castrol 2 Castrol 2 BFSI 25 BFSI 25 HDFC 5 HDFC 5 HDFC Bank 5 HDFC Bank 5 SBI 6 SBI 6 Axis Bank 5 Axis Bank 5 CARE 2 CARE 2 IndusInd Bank 2 IndusInd Bank 2 Power, Infrastructure & Cement 16 Power, Infrastructure & Cement 16 L & T 6 UltraTech Cement 5 L & T 6 Star Ferro & Cement 2 UltraTech Cement 5 Container Corporation of India 2 Star Ferro & Cement 2 Shree Cement 2 Container Corporation of India 2 Shree Cement 2

Source: Bloomberg, ICICIdirect.com Research DiversifiedDeal Team portfolio – At Your (2/2) Service

Earlier Now

Name of the company Weightage(%) Name of the company Weightage(%) FMCG 7 FMCG 7 ITC 5 ITC 5 Kansai Nerolac 2 Kansai Nerolac 2 Metals & Mining 3 Metals & Mining 3 Tata Steel 3 Tata Steel 3 Oil and Gas 4 Oil and Gas 4 ONGC 4 ONGC 4 Pharma 9 Pharma 9 Lupin 2 Lupin 2 Sun Pharma 3 Dr. Reddy's Lab 3 Natco Pharma 2 Natco Pharma 2 Torrent Pharma 2 Torrent Pharma 2 IT 10.5 IT 10.5 Infosys 4 Infosys 4 TCS 4 TCS 4 Wipro 2 Wipro 2 Telecom 2 Telecom 2 Bharti Airtel 2 Bharti Airtel 2 Media 4 Media 4 Zee Entertainment 1 Zee Entertainment 1 PVR 2 PVR 2 Capital Goods 2 Capital Goods 2 Cummins 2 Cummins 2 Total 100 Total 100

Source: Bloomberg, ICICIdirect.com Research Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC Andheri (East) Mumbai – 400 093 [email protected]

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