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Domestic Consumption
Indias economy is driven by domestic consumption. Indias private domestic consumption as a percentage of GDP is 57%*, as compared to China which consumes only 37%* of its GDP. Rural India which constitutes 72%^ of the total population is insulated from global shocks to a great extent as it still depends on agriculture and allied activities. Moreover services aimed at domestic market continue to do well due to a high pent up demand. A stable economy thrives on positive demographic profile leading to a mix of savings and consumption. India which ranks 164# in the world lagging behind countries such as Kazakhstan, Sri Lanka, and Cuba in terms of per capita income will make significant progress in the years to come.
*Global Insight: McKinsey Global Institute Analysis ^ Press Information Bureau # CIA World Fact Book
Indias working population has been growing at a healthy 2.1%*, compared to a 1.1%* growth in the US and a 0.5%* growth in the UK.
Closer home, the proportion of working-age population in East Asian countries will stabilize by 2015 and decline gradually. India, in contrast, is at an inflexion point as its working age population is expected to grow till 2035 before stabilizing for another 15 years.
India which has a median age of 25*, per capita income of USD 3100* (ranks 164* in the world in terms of per capita income) will make significant progress in the years to come.
Indias savings rate has improved over the years to 36%* of GDP. Consumption growth will also accelerate as the young take center stage. India still lags behind hugely on all core infrastructure and consumption parameters.
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0 Steel Consumption ( per capita kg) Source: Angel Research, World Steel Association Cement Consumption ( per capita kg)
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China
India
(Nos.)
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70 60 50 40 30
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200 100
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20 10
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USA Source: Angel Research, Crisil China India
USA Mcap/Gdp
India Mcap/Gdp
1.8
1.6 1.4 1.2
1.0
0.8 0.6 0.4 0.2 0.0 1970 1980 1990 2000 2008
1.0
0.9 0.8 0.7 0.6 1990 2000 2010P 2020P 2030P
As equity gains prominence, a doubling of the domestic allocations to 10%^ of savings in the next 5^ years (domestic allocations doubled during the previous 5 year period FY2004-09) would increase retail and HNI inflows by 3.5x^ into the equity market.
When exposure to equities increases over a period of time, it has been observed that midcaps tend to create more wealth than large caps.
* RBI ^ Angel Research
Combining a strong earnings growth in the medium term, a lot of wealth can be created in the right midcaps.
Portfolio Management Services
PMS Registration No.INP000001546
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20
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5 Jun-08 Aug-07
Sep-09
Sep-04
Feb-05
Mar-07
Nov-08
Dec-05
Feb-10
Oct-06
Jul-05
May-06
Apr-04
Jan-08
SENSEX (RHS)
Apr-09
Jul-10
- Stock returns: 49x - Institutional Holding up from 15% to 28% - Sensex P/E expanded from 11.2x to 19.5x
- Discount to Sensex in FY03: 4%
100
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FY03 FY10
Rs 1 Lac invested in Mar -03 would have amounted to more than Rs 49 Lac in Mar -10
Source: BSE India, Capitaline, Bloomberg, Angel Research
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PAT (Rs. Cr) 125 100 75
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25 0 FY03
Source: BSE India, Capitaline, Bloomberg, Angel Research
FY10
Rs 1 Lac invested in Mar -03 would have amounted to more than Rs 58 Lac in Mar -10
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Source: BSE India, Capitaline, Bloomberg, Angel Research
FY10
Rs 1 Lac invested in Mar -03 would have amounted to more than Rs 101 Lac in Mar -10
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300 200 100 0 FY03 FY10
Rs 1 Lac invested in Mar -03 would have amounted to more than Rs 230 Lac in Mar -10
Source: BSE India, Capitaline, Bloomberg, Angel Research
Midcap Investing
Midcap investing presents a daunting challenge of assessing the qualitative and quantitative aspects of a business to decide the right value. A good stock bought at expensive valuation may lead to underperformance while investing in a bad business at any level may lead to a capital loss.
Investment Objective
To create Wealth over the medium to long term by investing in mid caps and small caps blending the philosophy of Value and Growth investing.
Investment Strategy
Growth is viewed through the prism of value. A unique matrix of Profitability (RoNW), Growth prospects, and Value proposition employed to chose 12 to 14 Companies among thousands of listed stocks.
Portfolio
Angel Growth
Profitability (RoNW)
Weighted average RoNW of the portfolio to be at least equal to that of Sensex Companies* on 12 to 18 month forward estimates
Growth
Weighted average Growth prospects of the portfolio to be at least equal to that of Sensex Companies* on 12 to 18 month forward estimates
Value
Weighted average P/E or P/BV (which ever is applicable) of the portfolio to be at least 25% lower to that of Sensex Companies *on 12 to 18 month forward estimates
Investment Strategy
Turn around stories are also considered with in the framework of the Profitability- Growth- Value matrix. For instance:
Tech Mahindras profits have been impacted due to the debt taken on its books for the acquisition of Satyam Computers. It paid an interest of Rs 218 Crore in FY10 compared to Rs 2.5 Crore in FY09. Interest adjusted for taxes accounted for almost 26% of its profits of Rs 700 Crore in FY10. Tech Mahindra generates a free cash in excess of Rs 800 Crore per annum and at that rate it can retire its debt of approximately 1400 Crore in 2 years leading to a huge jump in profits.
Businesses that generate inferior Return on Networth (RoNW) as compared to the Sensex Companies* over longer periods of time (3 to 5 years) are not considered for investment.
*Note: Although our performance benchmark is BSE Midcap, we intend to invest in Midcaps and Small-caps whose business fundamentals are in line or better than the Sensex Companies who happen to be the leaders in their respective industries .
Investment Strategy
Active portfolio management ensures periodic profit booking while infusion of fresh ideas keeps the portfolio current with the macroeconomic conditions. Emphasis on Wealth creation. Endeavor to leverage the power of compounding to grow the portfolio. Ensure that unnecessary churning is avoided in the portfolio to reduce the financial costs to the client. Stock selection based on Fundamental Analysis.
Tyres, 9.1%
3i Infotech
JK Tyres & Industries
* As on 31st July 2010
9.3%
9.1%
IT & ITES
Tyres
- 6.1% 3.1%
- 2.9% 11.8%
26.5% 41.5%
36.6% 15.4%
17.8% 3.6%
Note: The above indicated Strategy returns are absolute (except where it is indicated^) in nature and are calculated on the Time Weighted Rate of Returns (TWR) methodology. Returns of individual clients may vary depending on their time of entry/profit booking in the Strategy. Past performance may not be indicative of the future returns delivered by the Portfolio Manager.
Service Proposition
Online Access to Portfolio Login Id & Password Interactive back office interface for detailed view of portfolio Monthly fund performance and fund manager views on e-mails Quarterly performance report statement in a new form Dedicated fund coordinator for fund related queries Centralized team of service coordinators for hassle free servicing Event based interaction with fund management team Servicing from large network of branches across India
Fee
Nil 2%* Nil Nil As Applicable Nil As Applicable 0.5% per Transaction
*In the case of redemption with in the first year, a fixed management fee of 2% will be levied on the assets under management.
Investment Dynamics
Investment horizon: 18 to 24 months Risk: Moderate Return: Moderate
DISCLAIMER: Investments in Securities are subject to market risks and other related risks and there is no assurance or guarantee that the objectives of any of the strategies of the Portfolio Management. As a SEBI registered Portfolio Manager Angel Broking Ltd provides Portfolio Management Services to clients and at no point of time assure guaranteed returns. Past Performance of schemes do not guarantee/indicate future performance. This document has been prepared by Angel Broking Ltd. based upon information available to the public and sources including newspapers and information available on various financial web-portals and other media which are generally believed to be reliable. No representation or warranty, express or implied is made by Angel Broking Ltd with regard to the accuracy, correctness and completeness of the contents. The information contained herein does not constitute an offer, solicitation or recommendation for the purchase or sale of any securities or other financial instruments nor does the information constitute advice or an expression of our view as to whether a particular security or financial instrument is appropriate. The recipient is requested to make itself aware of all the risk factors including its financial condition, suitability to risk return profile, e.t.c and read and understand the Risk Disclosure Document prior to availing Portfolio Management Services This document is not for public distribution and has been furnished solely for information and must not be reproduced or redistributed to any other person. Persons into whose possession this document may come are required to observe these restrictions. No part of this material may be duplicated in any form and/or redistributed. This material should not be circulated in countries where restrictions exist on soliciting business from potential clients residing in such countries. Recipients of this material should be aware of any restrictions imposed on them w.r.t possession of such documents. Angel Broking Ltd stands indemnified from any disputes/issues that may arise on account of failure on this part by the recipient. SEBI Registration No : INB 010996539 Website: www.angeltrade.com