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Market View
Last week the market has scaled yet another high and ended above 8450/28300. The stimulus talks in euro zone and in
Japan coupled with the rate cut by china is fueling the world market. India has many reasons for the rise and new high in the
market. The talks of remarkable reforms / new bills to be introduced in the winter session of the parliament starting from 24th
November and some more aggressive reforms on LPG front are some of the few reasons. The mega deal by Kotak
Mahindra bank and ING Vysya bank has really put the financial and banking sector on fire. But the most important thing at
present is to select the stock which can go higher from this level. In the time of golden decade and mega trend one has to be
more selective and has to adjust his strategies to find companies that are set to ride the overall up swing. Such companies
typically fall in three categories and are set to break new ground and succeed in today's market.
Three kinds of companies to watch for are,
a) Organic revenue generators
b) Efficiency vendors
c) Innovators
Organic revenue generator companies are the companies that can grow at brisk pace without much capital cost. They have
to spend little but can grow remarkably, for e.g. Page industries and nestle. They have good brands and ability to grow
organically and competition cannot hurt them because of their branding. Capital expenditure is also low with minimum
advertising or hiring cost. Such business has secular growth embedded in them. Next in line are efficiency vendors, this
companies sell efficiencies or help in productivity improvement. Take the case of Honeywell automation and UCAL fuel. It
offers solution to reduce operational cost, improve efficiency and reduce down time for any particular business. In short,
such companies help other companies to realize and get more value from their existing operations. In the time of more
capital expenditure and picking up of investment cycle, this companies being specialized in their operations have first mover
advantage and are better placed then others. The last category is innovators. As the name suggests, this companies
innovates and grab the market share with good pricing power. Unfortunately, India does not provide many cases in this
category except some information technology and health care companies.
In short, these three categories of companies are set to ride the mega trend started in the Indian market. So far as the mega
deal of ING and Kotak bank, it is the largest ever deal seen in the Indian banking space. The last such merger was of bank of
Rajasthan with ICICI bank. Taking the different parameters of customer and deposit base, asset quality increase in
presence, branches and network, capital adequacy, etc., the deal really makes sense to the merged entity and particularly
the Kotak Mahindra bank.
Kamlesh Jhaveri
Managing Director
Jhaveri Securities Ltd.
Selection of the scripts is all important at present in the market

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IssueTheme
1
Winter Session of Parliament
US is out, Japan is in
How it will benefit to India ?
Cabinet reshuffle : Past record along with strong pragmatism holds key
Why this is important ?
The Federal Reserve has been flooding the U.S. economy with cheap money through its bond- buying program since the
financial meltdown of 2008-2009. This provided much needed liquidity to the economy. so much cheap money in the market,
interest rates (the price of money) practically fell to zero.
The latest round (QE3) was announced in September 2012, with monthly purchases of $85 billion in treasuries and
mortgage-backed securities. The FED began has started reduction of purchases in January 2014, cutting them by $10
billion per meeting.
On October 28-2014, The Federal Reserve confirmed it will end an asset-purchase programmed keep interest rates low for
a “considerable time.” ( No specific timeline has given)
Bank of Japan will increase its purchases of longer-term debt, building on a stimulus plan first announced a year and a half
ago. The bank will now make asset purchases at an annual pace of around 80 trillion yen, an increase from the previous 60
to 70 trillion yen target range.
The bank's decision was far from expectation as five board members voted in favor of additional stimulus, while four voted
against the proposal. The programme is designed to stimulate Japan’s economy by encouraging more lending and thus
more spending. The actions are meant to boost “Abenomics” (Economics + Shinzo Abe), an ambitious plan for economic
reforms described by Japan’s Prime Minister ShinzoAbe.
The additional stimulus package from the Japanese central bank is positive news for India, and with macros situation well
balanced, India stands out compared to other emerging market economies. Some of this excess liquidity will be coming to
India compared to other emerging market economies because within the emerging markets, India appears to have the
strongest potential on the back of solid fundamentals, enough potential for a re-rating in valuations and a stable-yet-dynamic
government at the central.
In recent cabinet expansion, Modi government expands his ministry with the induction of four cabinet ministers, and 17
ministers of state, three with independent charge.
The reshuffle fills gaps and addresses the need of departments that require urgent attention to ensure a quick economic
revival. Infrastructure is a key area of focus for the government and Prime Minister Modi is believed to be particularly keen to
see a turnaround of the department.
The expansion has also given direction at enhancing the government’s mental capacity required to deal with a situation and
members strength.
Proven track record matters :As the focus is clearly on governance and aptitude of those being inducted. For instance, in his
previous position as the power minister, Suresh Prabhu came up with the landmark legislation of Electricity Reforms Act,
2003. As Prabhu might have more success than his predecessor Sadananda Gowda in driving change in the Railway
department.

IssueTheme
2
All eyes on winter session of parliament
Q2 FY15 : Healthy bottom line, weak top line growth of Indian Inc.
Conclusion
The government proposed that the winter session of Parliament begin on 24 November and last for a month—a crucial
period that could present lawmakers with a packed agenda of 67 Bills awaiting passages. The committee suggested a total
of 22 sittings in the session during the course of which the government will try to pass 67 Bills—eight pending in the Lok
Sabha and 59 in the Rajya Sabha.
After daily opposition disruptions in proceedings during the last UPAgovernment, the previous session of Parliament in July-
August this year was a productive one in terms of actual hours of sittings, business transacted and debates. According to a
report by the PRS Legislative Research, the Lok Sabha’s productivity in the budget session was 104%, while the Rajya
Sabha was at 99%.
The bills which are likely to be discussed in winter sessions are :
• The Insurance Laws (Amendment) Bill which seeks to raise the cap on foreign direct investment (FDI) in insurance to
49% and which was sent to the select committee in the previous budget session.
• Goods and Services Tax (GST) ConstitutionAmendment Bill, which has been delayed due to lack of consensus among
the states and centre.
• The LandAcquisition and Rehabilitation and Resettlement Bill.
• Labor reforms through amendments in the FactoriesAct,ApprenticesAct and Labor Laws Act.
A recovery remained intangible for India Inc. in the second quarter. Although India is the new star among the emerging
markets but India Inc's quarterly numbers indicate that the possibility of a slower than anticipated pace of industrial recovery
now looks more prominent than it was a quarter ago.
During the quarter ended September 30, the net profit (adjusted for exceptional items) of 2,432 companies (excluding
banking & financial and oil & gas ones) rose 41.8% on a YoY basis — the fastest pace in at least three years — but their net
annual sales growth drooping to 5.9%, slowest in five quarters.
The profitability was boosted by last year’s low base and lower operational cost, especially with a drop in sales & marketing
expenses, finance cost and depreciation
Stability in the rupee-dollar exchange rate and the recent decline in international commodity prices are likely to aid margins
in the coming quarters as well, though the net impact would get moderated by lower top-line growth.
Everybody knows that Prime Minister is amongst such highly reputed politician, who is well-known for his public speaking
skills and has that dedication to take India reach to a developed level with his abilities. In last six months, Modi and his team
has taken various steps to spur economic growth such as Diesel de -control, rail fare hike and manage constructive view on
GST. However, as winter session is in progress, all eyes on how Modi is able to convince oppositions who have gangs up
recently and push up the reform agenda. We believe that Investors are ready to pay premium valuations on new
government's promise to turnaround the Indian economy via big bang reform measures. As there is no near term negative
news for the market and key benchmarks have seen stellar performance this year, we have positive / bullish outlook on the
market.
Winter Session of Parliament

www.jhaveritrade.com3
Power Sector Update
SectorAnalysis
Power Sector Update
Normal power deficit continues to stay lower
Power generation
Indian power sector continue to see challenging times with moderation in demand growth and poor utilization of plants due
to fuel shortage or off take issues or transmission constraints. Moreover continued approval delays and high cost or lack of
funding continues to escalate execution risk affecting the private investor sentiment thereby affecting the long-term growth
of the sector.
All India normal power demand for the period of April-September 2014 stood at 552633 million units, with growth of 7.8%.
But with supply increase by 8.9% to 530350 million units the power deficit for the period stood at 4% compared to 4.8% in the
corresponding previous period.
Despite lower per-capita power consumption, as the economic activity yet to pick up strongly the HT power demand was still
low and state utilities are happy with power shutdown rather than supplying power round the clock result in slower pace of
demand growth in the country. On the other hand with more capacities getting commissioned has improved the supply
position, which bought down the deficit.
According to data released by Central Electricity Authority (CEA), the power generation of the country for the month of
September 2014 was up by 3.78% with thermal power generation grew by modest 2.6% to 65.9 billion units. However the
generation for the first six month period ended September 2014 was up by 10% to 531.8 billion units with strong 13.2%
growth coming from thermal power generation. Single digit growth in thermal power generation is largely on account of
pickup in hydel power generation as well as scheduled plant maintenance of significant number of units undertaken by
major producers compared to corresponding previous period.
The hydel power generation of the country was up by 7.2% to 16.1 billion units in September 2014. The pickup in rain fall
since July 2014 as well as fast filling of reservoir and release of water for irrigation has facilitated good hydel generation in
the month of September 2014.
Company
NTPC (Standalone)
NTPC (including JV)
GIPCL
CESC
Reliance Infra
Tata Power
Adani Power
JSW Energy
Lanco Infratech
GMR Infra
Torrent Power
Reliance Power
NHPC
Company wise power generation
Month-ended Year-ended
Sept-14
18152
18633
272
812
362
3209
2494
1930
1204
766
478
2423
2454
Sept-13
18289
19469
318
804
420
3303
3462
1693
1516
253
398
944
1903
Change (%)
-0.6
-4.3
-14.6
1
-13.9
-2.8
-28
14
-20.6
203
20.1
156.7
29
Mar-14
233519
248300
3423
8930
5199
41257
43782
18801
22891
4487
4996
11407
18336
Change (%)
0.6
0.5
-18.5
2.5
-5.1
33.5
88.1
-9.2
-1.6
112.9
-31
43.4
-3
Mar-13
232015
247120
4201
8714
5476
30913
23277
20709
23258
2108
7236
7954
18893
Note: Generation data excludes generation from renewable sources & CPP/group captive &Figures in GWH

Power Sector Update
4
SectorAnalysis
Sharp jump in short term power price inAug 2014
Storage levels at major reservoirs stood at 93% of corresponding period last year
Conclusion
Our Preferred Stocks
Short term electricity volume traded in August 2014 was up by 5.8% to 9634.14 million units compared to corresponding
previous month. In August 2014 while the bilateral trader/power exchange, bilateral direct and power exchange was up by
21.9%, 6% and 3.9% respectively the unscheduled interchange (UI) volume was down by 16%. While the bilateral market
price was flat the rate at IEX, PXIL and UI was up by 109%, 95% and 141% respectively. The average power price in short
term market barring bilateral market has witnessed impressive rise. While the bilateral market average price forApril-August
2014 was down by 5.4% the rate at IEX, PXIL and UI was up by 28.9%, 50.8% and 63.6% respectively over corresponding
previous period.
The healthy monsoon rain fall activity started from July 13, 2014 has facilitated improvement in reservoir levels across the
country. The water storage in 85 important reservoirs (including 37 reservoirs having hydro power of more than 60MW that
stood at 35% of the total storage capacity of these reservoirs as end of July 24, 2014 has improved to 66% as end ofAugust
28, 2014. The storage capacity of these reservoirs has further increased to 77% ( of total storage capacity as the end of
September 11, 2014. But the present storage capacity of these 85 important reservoirs is 93% of the storage of
corresponding period of last year. Similarly the reservoir levels of North, East, West, Central and Southern region as end of
September 11, 2014 stood at 83%, 75%, 78%, 82% and 72% of the total storage levels respectively. the reservoir levels are
still lower than same period of last year and this is likely to lower the hydel power generation.
Power sector caught in structural issues witnessed mid single digit power deficit on the back of strong new generation
capacity coming on stream as well as subdued growth in demand Inspite huge growth potential due to low per-capita power
consumption compared to other developing and developed countries and still elusive uninterrupted power supply scenario
in the country.
To improve investor confidence and sustainable growth of the sector the issues related to inadequate fuel availability, lack of
clarity around new bidding norms for long-term PPAs, transmission corridor issues, high T&D losses and weak financial
condition of the Discoms need to be addressed in a meaningful manner. The government though has demonstrated a
resolve to address the structural issues impacting the power sector the impact of the same at ground level is yet to be
witnessed. Moreover the uncertainty created by cancellation of captive coal mines has to be solved with re auction of the
same at the earliest in transparent manner.
Company
Year
NTPC
Power Grid
CESC
Tata Power
EPS
FY15E
10.9
10.4
25.5
2.6
FY16E
12.7
12.1
49.7
4.2
FY15E
13.1
13.8
29.7
33.6
FY16E
11.3
11.9
15.2
21.0
FY15E
9.3
11.2
13.4
7.5
FY16E
8.3
10.7
8.8
6.5
FY15E
9.9
8.0
5.7
11.0
FY16E
10.5
7.9
10.0
13.1
FY15E
9.9
14.1
5.7
5.3
FY16E
10.8
14.6
10.0
8.4
P/E(X) EV/EBITDA(X) ROCE(X) ROE(%)

CCL Products (India) Ltd.
CompanyAnalysis
Company Overview
Investment rational
Greenfield Operations in Vietnam to help growth
Logistical benefit
Duty structure is one of the improvement in Vietnam
Indian operation : Maximum capacity utilization is expected
CCL Products (India) Ltd (CCL) is India’s largest private label instant coffee company
supplying to premium brands in ~80 countries. Through its subsidiaries, the company
has also set up an agglomeration plant in Switzerland (to penetrate Europe) and a spray
dried and concentrated liquid coffee plant in Vietnam.
CCL's wholly owned step down subsidiary in Vietnam, M/s. Ngon Coffee Company
Limited, has commenced commercial production in FY14. The presence in Vietnam
helps the company to cater to the coffee needs of ASEAN countries and also this is in
close proximity to many South-East Asian nations, Japan, Korea, China etc. Most of
these countries have granted Vietnam a most favored nation status with reduced or nil
duty structures in addition to having savings on logistics.
The company's new plant is in coffee producing zone and the unit is likely to save
significant amount on per tonne basis on the logistics front. As logistic cost is higher on
per tonne basis in consolidated financials, the savings would be ~$150-160/tonne.
Vietnam is most important nation for reduced or nil duty structures for export. As instant
coffee exports to Japan from Brazil and India attract effective duties of ~15% and ~6%
while it is only ~1%-2% in the case of Vietnam. Company’s products are competitive in
the export market. This price advantage should help the company to tap new markets in
the long term.
Company's current installed capacity is 88% in FY14 at its Guntur plant in Andhra
Pradesh, CCL is expected to operate at an maximum capacity utilization of 90-92% in
next two years due to :
“Accumulate” CMP : `143 TGT : `186Company Basics
BSE ID
NSE Symbol
GROUP
EQUITY ( in Cr.)
MKT.CAP ( in Cr.)
`
`
519600
CCL
B
26.61
1803.49
Financial Basics
FV ( )
EPS ( )
P/E (x)
P/BV (x)
`
`
2.00
6.12
24.42
5.11
Investment Rationale
Investment Horizon: 12 months
Share Holding Pattern
Holder's Name
Foreign
Institutions
Promoters
Non. Promoters
Public & Others
Govt. Holding
% Holding
13.65
9.95
44.54
6.82
25.05
0.00
ROI : 30%
Valuations
Currently, CCL is trading at `143.We
Recommend “Accumulate” with a
Target Price of `186 based on
forward P/E of 20.00x with an
expected earnings per share of
`6.00 in FY2017E.

CCL Product (India) Ltd
Company Structure
Standalone
Business
Jayanti Pte Ltd
India Operations
(15,000 tpa)
Ngon Coffee
Company
Spray Dried
10,000 tpa
Concentrated Liquid
5,000 tpa
100 %
Product Portfolio
Exports
Domestic
(In House Brands )
Packaging Options
Source: Company
Continental
Speciale
Continental
Premium
Continental
Supreme
Freeze
Concentrated
Liquid
Freeze
Dried
Spray
Dried
Powder
Spray
Dried
Granules
CansJar Drums BulkBoxes Bag in BoxSachets
CompanyAnalysis
a) Increasing global consumption of coffee
b) Consumer preference is shifted to instant coffee in the Emerging Markets
c) Strong relationships with global clients.
CCL has already enetred into retailing of coffee with brand like Spéciale, Premium and Supreme and market test practice
has been already completed inAP. Other manufacturers like Nestle and HUL do not have manufacturing capacities So over
longer term CCL has advantage as compared to others. Fro Example : while Nestle ’s pure coffee (freeze dried) is priced at
`250/jar, CCL’s brand is priced at a relatively lower price of `110/jar. We believe that company will expand it other states also
once test marketing is finished.
Surprisingly, CCL operates on fixed margins, without carrying the risk of coffee price volatility. CCL buys green coffee beans
by importing these (~75%) from Global markets (Vietnam, Indonesia, Africa countries) as well as the domestic market
(~25%), primarily from southern state Karnataka.
Moreover, as far as margins are concerned, the company remains unaffected by fluctuations in the green coffee beans
prices or the coffee prices as it places orders for green coffee only on receiving the order for instant coffee and makes back-
to-back arrangements for green beans.
Retailing of instant coffee : Next phase of growth from company
Sourcing :AKey CompetitiveAdvantage

CompanyAnalysis
NorthAmerica : the next big market for CCL
Q2 FY15 conference call update
NorthAmerica is one of the largest instant coffee consumers at ~80,000tn-100,000tn.As of now, CCLsells less than 2,000 tn
and mostly in bulk quantity. CCL was not able to tap the North American market because of increased availability of
adulterated coffee from Brazil and Mexico. The adulterated coffee is available at ~US$4.0/tn with a 90-day credit period
whereas CCLcoffee is available at ~US$8.35/tn with zero credit.
There are strict regulations on coffee adulteration in the European Union and Russia, but it is not the case in the US. CCL
feels that it will be one of the beneficiaries once the law is formally in place in NorthAmerica which would curb the supply of
adulterated coffee (from Brazil and Mexico), as it happened in Russia and the EU earlier. In order to seize such an
opportunity, CCL is setting up a packaging facility in North America at a cost of US$8mn-US$10mn.
Margins in domestic operations are lower because of steps taken to add clients. To get clients, which will benefit in the
long run, CCL supplied its products at attractive prices, thereby hurting its margins. However, the margins are
expected to bounce back in 2HFY15. 3Q and 4Q are better quarters than 1Q and 2Q on account of seasonality.
The management has given volume guidance of ~20,000tn (India/Vietnam: 15,000tn/5,000tn) for FY15 and out of
this 90% has already been pre-sold.
The Vietnam plant operated at ~40% of its capacity in 1HFY15 and is expected to operate at ~50% in FY15 (~60% in
2HFY15). In 1HFY15/2HFY15, Vietnam has achieved/expected to achieve volume of 2,000tn/3,000tn, respectively.
As per the management, total volume is expected to increase 25% at 25,000tn in FY16. Vietnam plant’s volume is
expected to increase 50% from 5,000tn in FY15 to 7,500tn (75% capacity utilizations) and Indian operations’ volume
is likely to increase 16% from 15,000tn to 17,500tn.
CCL is expanding its Indian operations from 15,000tn to 20,000tn at a cost of ~Rs200mn through brown field
expansion and by adding balancing equipment by 2QFY16.
•
•
•
•
•
Key Finacials
Total Income
EBITDA
Reported Profit After Tax
Net Sales
Other Income
Total Expenditure
Interest
EBIT
Depreciation
PBT
Tax
Deferred Tax
Q2 FY 14
154.85
33.72
21.31
154.64
0.21
121.13
1.79
31.93
3.5
28.43
7.5
-0.38
Q3 FY 14
164.96
34.25
18.70
164.76
0.2
130.72
1.94
32.31
3.55
28.75
10
0.05
Q4 FY 14
164.87
32.69
17.95
164.48
0.4
132.19
1.41
31.28
2.41
28.87
10.4
0.52
Q2 FY 15
195.74
37.81
21.45
195.35
0.39
157.94
1.19
36.61
2.37
34.25
12.18
0.62
Q1 FY 15
132.98
25.63
15.7
132.6
0.38
107.34
1.85
23.78
2.41
21.38
5.82
-0.14

CompanyAnalysis
8
Year
Equity Paid Up
Net worth
Capital Employed
Gross Block (Excl. Reversal. Res.)
Net Working Capital ( Incl. Def. Tax)
Current Assets ( Incl. Def. Tax)
Current Liabilities and Provisions ( Incl. Def. Tax)
Total Assets/Liabilities
Gross Sales
Net Sales
Other Income
Value Of Output
Cost of Production
Selling Cost
PBIDT
PBDT
PBIT
PBT
PAT after Minority Interest & P/L Asso.Co.
Adjusted PAT
FY 11
13.3
217.16
437.63
359.68
119.39
191.63
72.24
509.87
365.41
363.87
9.78
377.29
316.45
9.94
74.52
58.58
55.26
39.32
26.45
24.58
FY 12
13.3
239.74
507.62
363.33
151.64
214.79
63.15
570.77
504.95
502.22
2.01
498.45
398.31
13.77
89.12
74.27
69.02
54.17
36.24
36.21
FY 13
13.3
278.38
580.42
465.21
213.44
299.55
86.1
666.52
655.34
650.74
1.88
662.89
539.58
13.88
123.15
102.49
94.51
73.85
47.43
47.42
FY 14
26.61
352.79
644.86
525.17
239.2
319.37
80.17
725.02
721.52
716.82
2.64
711.74
569.92
14.27
145.73
128.67
116.63
99.57
64.42
64.43
Year
Debt-Equity Ratio (x)
Long Term Debt-Equity Ratio
Current Ratio
Interest Cover Ratio
PBIDTM (%)
APATM (%)
ROCE (%)
RONW (%)
(x)
(x)
(x)
FY 11
1.09
0.48
1.03
3.47
20.39
7.24
12.58
12.56
FY 12
1.07
0.44
0.97
4.65
17.65
7.18
14.6
15.86
FY 13
1.1
0.45
1.05
4.57
18.79
7.24
17.37
18.31
FY 14
0.94
0.41
1.24
6.84
20.2
8.93
19.04
20.41
( ` in Cr )

Qualified Institutional Placement
JSLClassroom
QUALIFIED
INSTITUTIONAL
PLACEMENTS
What is QIP?
How is the price decided ?
Main advantages of raising money via the QIB route:
Main advantages for QIB’s :
• A QIP is a capital raising tool wherein a listed company can issue equity shares, fully and partly convertible
debentures, or any security (other than warrants) that is convertible to equity shares. This is the only other speedy
method of private placement whereby a listed company can issue shares or convertible securities to a select group of
investors.
• But unlike in an IPO or an FPO (further public offer), only institutions or qualified institutional buyers (QIBs) can
participate in a QIP issuance. QIBs include mutual funds, domestic financial institutions such as banks and insurance
companies, venture capital funds, foreign institutional investors, and others.
• The QIP will be priced not less than the average of the weekly high and low of the closing prices of the equity shares
during the two weeks preceding the “relevant” date. The “relevant” date will be the opening date of the issue, as
decided by the company’s board.
Advantages for the issuing company
1) Speed : The regulatory oversight of SEBi is far more relaxed when money is raised via the QIP route. There is no long
wait for document approval by a SEBI dealing officer as is the case when a company does an IPO, FPO or rights
issue. The whole process can complete in 4-5 days, provided of course that the issuer company manages to get
willing QIBs buyers.
2) Cost efficiency : IPO/ Rights / FPO are an expensive affair. A large team of bankers, auditors, lawyers have to be
involved and the approval could take 4-5 months if not more. Further, the fees to be paid to the exchange are far
lesser in case of a QIP.
1) Ability to buy large stakes : Let’s say a large institution/ investor is convinced about the long term business
fundamentals of a business and would like to partner in the business by becoming a part stakeholder. Further, the
investor wants to hold a larger stake (think 10-15%).In such a scenario issuing new shares by increasing capital is the
only pragmatic way to bring in a new investor for two reasons :
• If the investor tries to buy from secondary / open market, it will create a lot of volatility in the price of the listed share
which will lead to expensive valuations and distort the very value at which the investor was willing to acquire the stake
i.e. it will make the purchase price unattractive for the large investor.
• If the company’s long term fundamentals are genuinely attractive, it will be hard to find sellers, especially at the price at
which the new investor would like to acquire the stake.
2) No Lock-In : Unlike investing in an IPO where accredited investors (or QIB buyers) must hold on to their shares for a
certain period of time (typically 1 year), a Qualified Institutional Placement allows the investor to exit/ sell the stock at
any point of time post its listing on the exchange.

Monthly Technical Picks
MonthlyTechnicalPicks
10
On Weekly Chart, Stock has given Breakout of its
continuation Flag Pattern. Here, Breakout Point is 1590.
Weekly RSI is in positive crossover suggesting buying
interest.Also Stock is trading above its 40 Week IMA.
On Weekly Chart, Stock has taken support of lower line
of its Andrew Pitchfork pattern and currently trading
above lower line. Now, Stock is likely to test median line
of the Pattern. Weekly RSI is in positive crossover
suggesting buying interest at every minor correction
seen in the stock on weekly basis. Also Stock is trading
above its 40 Week IMA.
On Weekly Chart, Stock has given breakout of its upper
arm of its likely symmetrical triangle Pattern. Here,
Breakout point is 162. Weekly RSI is in positive
crossover suggesting fresh buying interest intact at this
level.Also Stock is trading above its 40 Week IMA.
On Weekly Chart, Stock has given breakout of its Cup
and Handle Pattern. Here, Breakout point is 63. Weekly
RSI is in positive crossover suggesting buying interest.
Also Stock is trading above its 40 Week IMA.
BUYBTWN 60.50-63.50 TGT 69.85-74 SL55.50
LT BHEL
HINDALCO DISHTV
BUY BTWN 256-266 TGT 284-295 SL 240BUY BTWN 1590-1640 TGT 1738-1774 SL 1519
BUY BTWN 160-166 TGT 177-182 SL 150

MutualFund
11
Avast majority of risk averse investors prefer bank fixed deposits to debt mutual fund schemes. Perception of risk and lack of
financial awareness are the contributing factors. For investors who are willing to sacrifice the comfort of guaranteed returns,
long term income funds are better investment options than fixed deposits over a tenure of three years or more. While banks
have offered around 8.5 – 9% interest rates for a 3 year term deposits, top long term income funds have given returns of 9.5 –
10.7% over the last 3 year period. Further over tenures of three years or more, debt funds enjoy tax advantage over fixed
deposits due to the long term capital gains tax with indexation. If we add the difference in pre-tax returns and the tax benefit,
the post tax returns of long term income funds has been substantially higher than the bank fixed deposits.
Over a three year tenure top performing long term income funds have given 1.5 – 2% higher returns compared to fixed
deposits. On Rs1 lac investment the returns from income funds over a three year investment horizon would be Rs 2,000 to
6,000 higher compared to fixed deposits on a pre-tax basis. On a post tax basis the difference in returns will be even higher,
as we will discuss later in the article. The chart below shows the trailing three year annualized returns of the top income
funds.
Returns of top long term income funds
Long Term Bonds Pre-Tax Returns
Long Term Income Funds are better investment
options than FDs over a 3 year horizon
BANK FIXED DEPOSITS
DSP BLACKROCK STRATEGIC BOND FUND
UTI BOND FUND
CANARA ROBECO DYNAMIC BOND FUND
TATA INCOME FUND
ICIC PRUDENTIAL INCOME OPPORTUNITIES FUND
IDFC DYNAMIC BOND FUND
HDFC HIGH INTEREST FUND - DYNAMIC PLAN
BNP PARIBAS FLEXI DEBT FUND
RELIANCE DYNAMIC BOUND FUND
UTI DYNAMIC BOUND FUND
8.5%
9.5%
9.5%
9.5%
9.8%
9.9%
10.1%
10.2%
10.2%
10.5%
10.7%

MutualFund
12
While the top long term income funds outperformed fixed deposits over three year tenure, these funds gave higher pre-tax
returns than fixed deposits even in the last 12 months, despite prevailing high interest rates. The chart below shows trailing
one year returns of the top income funds.
We have been in the grip of high interest rates for a long time due to stubborn inflation. However inflation has been easing
over the past four months. In September inflation was 6.7%. Some bond market operators are expecting the RBI to cut rates
as early as December, but the majority of economists are of the view that RBI will start cutting rates in February 2015. The 10
year Government Bond yield has started inching down from historical high levels. It is now at 8.3% compared to 9% at the
beginning of the year.That is why we have seen the long term income funds giving good returns in the last one year.
Outlook for Long Term Income Funds
9.0%
10.8%
9.8%
9.9%
9.6%
12.3%
9.9%
11.8%
9.7%
10.7%
12.1%
BANK FIXED DEPOSITS
DSP BLACKROCK STRATEGIC BOND FUND
UTI BOND FUND
CANARA ROBECO DYNAMIC BOND FUND
TATA INCOME FUND
ICIC PRUDENTIAL INCOME OPPORTUNITIES FUND
IDFC DYNAMIC BOND FUND
HDFC HIGH INTEREST FUND - DYNAMIC PLAN
BNP PARIBAS FLEXI DEBT FUND
RELIANCE DYNAMIC BOUND FUND
UTI DYNAMIC BOUND FUND

MutualFund
13
9.5
9
8.5
8
7.5
7
9.5
9
8.5
8
7.5
7
Implied Yield on 10 Year Bond
Jul / 11 Jun / 12 Jul / 12 Jun / 13 Jul / 13 Jun / 14 Jul / 14
Source : Ministry of Finance
The 10 year Government Bond yield is expected to fall to 7% in FY 2015 – 2016. Bond prices have an inverse relationship
with interest rates. As interest rate goes down bond prices increase, leading to higher potential returns from long term
income funds over the next 2 to 3 years. When we move to benign interest rate environment, the returns of long term income
funds can potentially be even higher than the recent short term returns.
Income Funds are not risk free
Tax Benefit
It is important that investors understand that income or debt funds are not risk free. It is equally important that investors
understand the nature of the risk, so that they can make an objective investment decision, without being swayed by
perceptions.There are three kinds of risk that income or debt funds are exposed to.
• Interest Rate risk: If interest rate goes down bond prices and returns will increase. Conversely, if interest rate
goes up bond prices and returns will decrease. In the context of India's macro-economic outlook and the interest
rate environment, the probability of interest rate going up is very low.
• Re-investment risk: If the bonds in the income fund portfolio mature and the proceeds are re-invested in lower
yield bonds, then the returns will decrease. Re-investment risk is lower if the average maturity of the bonds in the
portfolio is longer. Long term income funds typically have longer maturity bonds in their portfolio, as we will see in
the table below.
• Credit risk: Credit risk relates to the risk of default. If the credit rating of the bond worsens the bond price will
decline and the returns will be lower. As far as credit risk is concerned, the top long term income funds have high
quality bonds in their portfolio.
Some significant taxation changes were made for debt funds in the last Budget. The holding period of long term capital gains
is now 3 years.If the holding period is less than 3 years, then the returns will be taxed as per the income tax rate of the
investor. If the holding period is more than 3 years, long term capital gains tax of 20% will apply. However, indexation benefits

MutualFund
14
are allowed for calculation of long term capital gains. Fixed Deposit interest, on the other hand, is taxed as per the income tax
rate of the investor, irrespective of the holding period. Indexation benefit reduces long term capital gains tax significantly.
Therefore for tenures of 3 years or more, income funds have a significant tax advantage over fixed deposits, especially for
investors in the higher tax bracket.
Let us see the difference between post tax returns of a long term income fund and fixed deposit with the help of an example.
Let us assume you invested Rs 1 lac in UTI Dynamic Bond Fund on November 1, 2011. Let us see how your post tax returns
compare with a Rs 1 lac investment in fixed deposit at 9% over the same tenure.
Investment (November 1,2011)
Pre - Tex Return
Investment Value (November 1, 2014)
Indexed Cost (Inflation Index 2010 -
2011 : 785 ; 2014 - 2015:1025)
Taxation
Tax
Post Tex Return
`1,00,000
10.7%
`1,35,547
`1,30,573
20% on LT Capital Gains with
indexation
`995
`34,552
`1,00,000
9%
`1,29,503
N/A
Income Tax (as per the tax
rate of the investor, 30%)
`8,851
`20,652
Post Tex Return Calculation UTI Dynamic Bond Fund Fixed Deposit

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Date Time in IST Country/EventCurrency
Mon Dec 1
Tue Dec 2
Wed Dec 3
Thu Dec 4
Fri Dec 5
Mon Dec 8
Tue Dec 9
Wed Dec 10
Thu Dec 11
Fri Dec 12
Mon Dec 15
Tue Dec 16
6:30am
All Day
6:30am
6:15pm
12:30pm
All Day
All Day
7:00am
7:00pm
11:00am
7:00pm
3:30pm
7:15am
1:45pm
2:15pm
8:30pm
1:30pm
3:30pm
8:30pm
7:15am
1:45pm
2:15pm
3:30pm
6:45pm
7:00pm
8:30pm
9:00pm
7:00pm
7:00pm
8:30pm
1:15pm
9:00pm
11:31pm
8:30pm
7:00pm
7:45pm
4:30pm
Manufacturing PMI
Total Vehicle Sales
Non-Manufacturing PMI
Minimum Bid Rate
German Factory Orders m/m
Eurogroup Meetings
ECOFIN Meetings
CPI y/y
Core Retail Sales m/m
Industrial Production y/y
Empire State Manufacturing Index
German ZEW Economic Sentiment
HSBC Final Manufacturing PMI
Spanish Manufacturing PMI
Italian Manufacturing PMI
ISM Manufacturing PMI
Spanish Unemployment Change
PPI m/m
Construction Spending m/m
HSBC Services PMI
Spanish Services PMI
Italian Services PMI
Retail Sales m/m
ADP Non-Farm Employment Change
Revised Nonfarm Productivity q/q
ISM Non-Manufacturing PMI
Crude Oil Inventories
ECB Press Conference
Unemployment Claims
Non-Farm Employment Change
Trade Balance
Unemployment Rate
Factory Orders m/m
PPI y/y
French Industrial Production m/m
10-y Bond Auction
Retail Sales m/m
Unemployment Claims
Import Prices m/m
Business Inventories m/m
PPI m/m
Core PPI m/m
Capacity Utilization Rate
Industrial Production m/m
ZEW Economic Sentiment
German Buba Monthly Report
CNY
USD
CNY
EUR
EUR
EUR
EUR
CNY
USD
CNY
USD
EUR
CNY
EUR
EUR
USD
EUR
EUR
USD
CNY
EUR
EUR
EUR
USD
USD
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EUR
USD
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EUR
Date Time in IST Country/EventCurrency
Wed Dec 17
Thu Dec 18
Fri Dec 19
Mon Dec 22
Tue Dec 23
Wed Dec 24
Fri Dec 26
Mon Dec 29
Tue Dec 30
Wed Dec 31
3:30pm
12:30am
12:30pm
2:25pm
7:15am
All Day
All Day
1:15pm
1:30pm
All Day
7:00pm
9:00pm
1:00am
2:30pm
7:00pm
2:30pm
12:30pm
1:30pm
2:00pm
2:30pm
7:00pm
8:15pm
8:30pm
7:00pm
9:00pm
8:25pm
2:30pm
8:15pm
8:30pm
12:30pm
6:45pm
8:30pm
9:00pm
Final CPI y/y
FOMC Economic Projections
German PPI m/m
German Unemployment Change
HSBC Flash Manufacturing PMI
German Bank Holiday
German Bank Holiday
French Consumer Spending m/m
Spanish Flash CPI y/y
German Bank Holiday
Final Core CPI y/y
CPI m/m
Core CPI m/m
Current Account
FOMC Statement
Federal Funds Rate
FOMC Press Conference
German Ifo Business Climate
Unemployment Claims
Current Account
Existing Home Sales
German Retail Sales m/m
French Flash Manufacturing PMI
French Flash Services PMI
German Flash Manufacturing PMI
German Flash Services PMI
Flash Manufacturing PMI
Flash Services PMI
Core Durable Goods Orders m/m
Final GDP q/q
Personal Spending m/m
Flash Manufacturing PMI
New Home Sales
Unemployment Claims
Revised UoM Consumer Sentiment
M3 Money Supply y/y
Private Loans y/y
Chicago PMI
CB Consumer Confidence
GfK German Consumer Climate
ADP Non-Farm Employment Change
Pending Home Sales m/m
EUR
USD
EUR
EUR
CNY
EUR
EUR
EUR
EUR
EUR
EUR
USD
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USD
USD
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EUR
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