Reliance Mutual Fund - R*Shares NV20 ETF (an open ended Index Exchange Traded Fund) [Rajiv Gandhi Equity Savings Scheme (RGESS) qualified scheme]

Transcription

1 Reliance Mutual Fund - R*Shares NV20 ETF (an open ended Index Exchange Traded Fund) [Rajiv Gandhi Equity Savings Scheme (RGESS) qualified scheme] NFO Opens : 11-June-2015 NFO Closes : 12-June-2015 Offer for Sale of Units at Rs.10/- (On allotment, the value of each unit of the Scheme would be approximately equal to 1/10th of the value of NV20 Index) per unit during the new fund offer period and Continuous offer for Units at NAV based prices

2 Value Investing - Opportunity For Investment

3 What is Value Investing Value investing is one of the major fundamental approaches of equity investment in the world. Value Investing is the philosophy of investing in securities which is undervalued in reference to its intrinsic worth. Intrinsic value of a company is based on factors like tangible assets, earnings, dividends, financial strength and stability, quality of management etc Buying at or below intrinsic value provides a "margin of safety" in value stocks that can help absorb unfavorable developments, with subsequently less risk of a market overreaction on the downside. In general, value investing is a long term approach which tends to initially produce current income via dividends and also offer the potential for long-term appreciation when the market recognizes the true value of the stocks. 3

4 Stock Screening in Value Investing The selection of companies for value investing are based on broad parameters like Predictable and Proven Earnings Has a competitive edge Stable Financial structure with low debt Fairly or undervalued stock based on margin of safety 4

5 NV20 Index A route to Value Invest in India

6 About NV20 Index Launched in January 2009, the NV20 Index is designed to reflect the behavior and performance of a diversified portfolio of 20 value companies forming part of CNX Nifty Index. It consists of the 20 most liquid value blue chip companies listed on NSE. NV20 Index provides exposure to broader sectors of the economy The company should have an investable weight factor (IWF) of at least 10%. The Weightage of the index constituent (where applicable) is capped at 15%, Weightage of such stock may increase between the rebalancing periods. Companies which have given dividends of not less than four percent, including bonus for at least seven years out of the nine years immediately preceding the review period. Companies are selected on the basis of ROCE, PE, PB and DY. Companies with relatively lower PE and PB, while higher DY and ROCE are selected. Source : IISL

7 NV 20 Index Methodology Companies forming the part CNX Nifty on the construction and rebalancing date are taken into consideration for selection of stocks Stocks are selected on the basis of ROCE, PE, PB and DY and final ranking is derived to select the value stocks from CNX Nifty Ranks are assigned to all the Nifty constituents based on each parameter i.e. ROCE, PE, PB & DY *.Relatively lower PE and PB receives a better rank, while higher DY and ROCE receive a better rank Weights of 0.4, 0.3, 0.2 and 0.1 are assigned to ranks of ROCE, PE, PB and Dividend Yield respectively to derive the final ranking for selection The top 20 companies as per the ascending order of the final ranking are selected to form the index. Index Re-Balancing: Index is re-balanced on semi annual basis. The cut-off date is January 31 and July 31 of each year, i.e. For semiannual review of indices, average data for six months ending the cut-off data is considered. Four weeks prior notice is given to market from the date of change. Source : IISL

8 NV20 & CNX Nifty- Year Ending Ratios NV 20 CNX Nifty Date Index Value P/E P/B Dividend Yield % Index Value P/E P/B Dividend Yield % 31/12/ /12/ /12/ /12/ /12/ /12/ /05/ Basic characteristic of value companies are low P/E ratio and high dividend yield. As per the year ending data mentioned in table, the P/E ratio of NV20 index is lower than CNX Nifty and the Dividend Yield of NV20 is higher than CNX Nifty consistently. Source : IISL Past Performance may or may not be sustained in future and the same may not necessarily provide the basis for comparison with other investment.

9 NV20 & CNX Nifty Index Movement Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May NV 20 Index Nifty Than NV20 has outperformed CNX Nifty and the outperformance has been consistent since Jan, Source : IISL Past Performance may or may not be sustained in future and the same may not necessarily provide the basis for comparison with other investment.

10 NV20 & CNX Nifty Calendar Year Returns Total Annualised Return (Including Dividend) Calendar Year NV 20 CNX Nifty Difference % 73.24% 39.07% % 19.22% 11.99% % % 2.88% % 29.43% -2.33% % 8.07% 6.10% % 32.90% 1.83% YTD* -1.38% 2.12% -3.50% NV20 has given higher returns than CNX Nifty in all calendar years except in 2012 Source : IISL Past Performance may or may not be sustained in future and the same may not necessarily provide the basis for comparison with other investment.. *YTD Returns as on 29 th May 2015.

11 Constituents of NV20 Index SL No. SECURITYNAME WEIGHTAGE 1 INFOSYS LTD ICICI BANK LTD RELIANCE INDUSTRIES LTD TATA CONSULTANCY SERVICES LTD AXIS BANK LTD STATE BANK OF INDIA HINDUSTAN UNILEVER LTD OIL & NATURAL GAS CORPORATION LTD MAHINDRA & MAHINDRA LTD HCL TECHNOLOGIES LTD COAL INDIA LTD HERO MOTOCORP LTD BAJAJ AUTO LTD NTPC LTD BHARAT PETROLEUM CORPORATION LTD TATA STEEL LTD GAIL (INDIA) LTD BANK OF BARODA PUNJAB NATIONAL BANK NMDC LTD Source : IISL as on 29-May-2015

12 Constituents of NV20 Index Metals 1.65% Industrial Manufacturing 4.56% Consumer Goods 4.59% Automobile 9.41% Energy 20.50% IT 29.31% Financial Services 29.98% Provides diversification across 7 broad sectors The highest exposure is to Financials Sector Lowest Exposure is to Metals Source:IISL 29 th May 2015

13 Why Invest In Exchange Traded Fund (ETF)?

14 ETFs Concepts Structured like Mutual Funds, but listed & traded on the exchange like stocks An ETF represents a basket of stocks that reflect an index An ETF helps you to achieve portfolio diversification, risk mitigation & cash equalization. Ease of transaction - Can be easily bought / sold like any other stock on the exchange subject to availability of buyer and seller through terminals spread across the country Ease of Liquidity - Can be bought / sold anytime during market hours at prices that are expected to be close to actual NAV of the Scheme. Thus, investor transacts at real-time prices instead of endof-day prices subject to availability of buyer and seller Other Special Features ETF UNIT ETF Fund Instant diversification through exposure to a large number of stocks by purchasing as low as 1 unit Efficient tool to execute strategies like arbitraging between cash & futures market Ability to put limit orders Basket of Stocks

15 ETFs an effective tool for one s portfolio Low Cost Long Index Exposure Derivatives have a high roll-over cost and also known for short term gains, ETFs hence makes a cost efficient option for maintaining long index positions. Cash Equitization Investors who maintain cash positions, awaiting suitable investment options, can use ETFs to gain instant exposure to equity markets as per their asset allocation, helping them access and not miss out on any market movements Core / Satellite Investment Strategies - ETFs allow investors to maintain broadbased / fundamental index ETF as their core and actively move satellite investment exposure to momentum or sector ETFs as per the market movements Sector Rotation / Tactical Allocation ETFs can be used to add or be overweight specific markets, sectors or industries to a core portfolio Portfolio Completion - ETFs allow investors to fill gaps in a portfolio in specific asset classes or sectors Use of ETFs by Arbitrator* - Low cost ETFs assist in arbitrages as buying ETF is fairly convenient compared to buying the entire set of stocks in the index basket *Subject to the market condition and availability of spread and liquidity.

16 Investment in NV20 via different Modes ETF Stocks Exposure in NV Index Buying a Single unit Need to buy 20 Stocks Rebalancing Easy Difficult Transaction Procedure Only a single unit needs to be purchased 20 different stocks in different weightage needs to be purchased Minimum Investment Single Unit Price depending on the unit size For eg If one unit is 1/10 of the Index, 3800/10= 380 one needs to spend only 380 Rs to buy one unit The cost of buying 20 stocks at their market price.(very High Cost as compare to ETF) Above table only shows investment in NV20 through different modes. Investors may makes investment in NV20 via other modes also. Investors are advised to consult their financial advisor before making any investment

17 R*Shares NV20 ETF (An open-ended, Index Exchange Traded Fund) [Rajiv Gandhi Equity Savings Scheme (RGESS) qualified scheme]

18 Positioning R*Shares NV20 ETF ETI Investment in R*Shares NV20 ETF is a route to value investing in India It allows investors to take part in India growth story by essentially investing in 20 most liquid value blue chip companies listed on NSE. The index is designed to serve as both a benchmark and an investable index and is comprised of 20 constituent stocks representing large, relatively wellestablished companies across key sectors Investments in R*Shares NV20 ETF can form part of core equity portfolio, especially for Institutional investors By investing in R*Shares NV20 ETF, strategies like cash equitization can be effectively deployed because of its inherent advantages like one of the best market representation.

19 About R*Shares NV20 ETF R*Shares NV20 ETF will be listed as an Exchange Traded Fund (ETF) on NSE Ltd. with Reliance Capital Asset Management Ltd. being the Asset Manager of R*Shares NV20 ETF R*Shares NV20 ETF will invest in NV20 Index companies only, in the same proportion as the underlying index, monitored and corrected (if required) daily Launched in January 2009, the NV20 Index is the subset of CNX Nifty Index, one of the oldest and most prominent broad based benchmark in India Investment objective or R*Shares NV20 ETF would be to provide returns that, before expenses, closely correspond to the total returns of the securities as represented by the NV20 Index subject to tracking errors. However there can be no assurance or guarantee that the investment objective of the scheme would be achieved P/E: 16.72, P/B : 2.72, Dividend Yield : 2.05 as on 29th May 2015 for NV 20 Index* * - Source : & Ratios of NV 20 Index.

20 Scheme Features : R*Shares NV20 ETF Investment Objective The investment objective of R*Shares NV20 ETF is to provide returns that, before expenses, closely correspond to the total returns of the securities as represented by the NV20 Index subject to tracking errors. However there can be no assurance or guarantee that the investment objective of the Scheme will be achieved. Liquidity Nature of Scheme Listed on Recognized Stock Exchanges & available for trade in 1 (one) unit and in multiples of 1 unit and with AMC in form of creation unit size of 6000 units and multiples thereafter An Open Ended, Index Exchange Traded Fund, RGESS Benchmark NV20 Index Asset Allocation Securities constituting NV20 Index 95%-100% Money Market instruments including CBLO 0%-5% (with maturity not exceeding 91 days) Load Structure Entry & Exit Load : Nil

21 Scheme Features : R*Shares NV20 ETF Transparency/NAV Disclosure The NAV will be calculated & disclosed on or before 5 working days from the closure of NFO and subsequently at the close of every working day which shall be published in at least two daily newspapers and also uploaded on the AMFI website and RMF website. Allotment of Units The value of each unit of the Scheme would be approximately equal to 1/10th of the value of NV 20 Index Minimum Application Amount Exchange : The minimum number of Units that can be bought or sold on the exchange is 1 (one) unit and in multiples of 1 unit. Directly from AMC : Restricted to Authorized Participants & Large Investors in form of creation unit size of 6000 units & in multiples thereafter Dematerialization Units of the scheme will be available in Dematerialized (electronic) form only. The applicant under the scheme will be required to have a beneficiary account with a Depository Participant of NSDL/CDSL and will be required to indicate in the application the Depository Participants (DP)name, DP ID Number & the beneficiary account number of the applicant.

22 Reliance Mutual Fund s ETF Features

23 Reliance MF ETF key advantages Liquidity: Apart from being readily available for trade on the recognized stock exchanges, ETF units can also be bought in creation units size by large investors directly from the asset management company ( /10 of NV 20 Index) Less of Ambiguity: The ETF s investment strategy & stock selection is clearly defined, holding stocks as per the underlying Index in the same weightages, monitored and adjusted (if required) for any index change on a daily basis Diversification: Buying a single unit will offer diversification benefit in the entire index companies Transparency: The index constituents are available in the public domain on a daily basis (available on Bloomberg page RITE ) Disclaimer - Please refer respective SID /KIM to know more about RMF Scheme

24 Trading options available Subscription Process Features Through Stock Exchange Through AMC (Authorized Participants & Large Investors) online terminal / stock broker Transaction form with requisite documents Redemption Process Features Can trade as less as 1 Unit Funding to be done on T+1 Unit credit on T+2 Transaction on Exchange traded price No paperwork Transaction on order matching and availability of quotes Can transact in multiples of creation unit size Can happen in Cash or basket of stocks Transaction in exchange of Portfolio deposit & Cash Component Through Stock Exchange Through AMC (Authorized Participants & Large Investors) online terminal / stock broker Redemption Request Can trade as less as 1 Unit Units taken on T+1 Amount credited T+2 Can trade in multiples of creation unit size Can happen in Cash or basket of stocks Transaction in exchange of Portfolio deposit & Cash Component Live Prices (NAV) with the basket is available on Bloomberg page RITE for reference

25 About the Fund Manager Krishan Daga is Fund Manager of various equity ETFs of Reliance Mutual fund i.e. R*Shares Banking ETF, R*Shares CNX 100 ETF, R*Shares Nifty ETF, R*Shares Consumption ETF, R*Shares Dividend Opportunities ETF and R*Shares Sensex ETF. He is also managing Quant PLUS fund, Gold Savings Fund, R*Shares Gold ETF, Nifty Index Fund, Sensex Index Fund, Arbitrage Fund and various dual funds with long term call option Strategy. Key Responsibilities Head - ETF Fund Management Total work experience of over 25 years He also heads ETF business. He has been with the Reliance Capital Asset Management Ltd since July Previous stints include Quantitative Analyst at HSBC Securities (1995 to 2003), JP Morgan ( ), Brics Securities ( ) and Deutsche Securities (2005 to 2007). Specialist in Quantitative Analysis and Portfolio Attribution Analysis. Graduate in Commerce from Rajasthan University.

26 About RGESS (Rajiv Gandhi Equity Savings Scheme) RGESS is an equity savings scheme aimed at encouraging new retail investors in India. It encourages small investors to benefit from investing in domestic capital markets. New Retail Investors who have gross total annual income less than or equal to Rs. 12 Lakhs eligible for tax benefits through section 80CCG of Income Tax Act, 1961 Investments have to be made in eligible securities as mentioned in RGESS. The holding period of eligible securities is three years with fixed lock-in of first year and a flexible lock-in period of subsequent two years. In the flexible lock-in period, investors will be permitted to trade, subject to specified conditions Deduction is available upto 50% of invested in such shares and mutual fund units, maximum deduction is available upto Rs For further details on RGESS, kindly refer the Scheme Information Document

27 Disclaimer Scheme Specific Risk Factors: Trading volumes and settlement periods may restrict liquidity in equity and debt investments. Investment in Debt is subject to price, credit, and interest rate risk. The NAV of the Scheme may be affected, inter alia, by changes in the market conditions, interest rates, trading volumes, settlement periods and transfer procedures. The NAV may also be subjected to risk associated with tracking error, investment in derivatives or script lending as may be permissible by the Scheme Information Document. NSE Disclaimer: It is to be distinctly understood that the permission given by NSE should not in any way be deemed or construed that the Scheme Information Document has been cleared or approved by NSE nor does it certify the correctness or completeness of any of the contents of the Draft Scheme Information Document. The investors are advised to refer to the Scheme Information Document for the full text of the Disclaimer Clause of NSE Disclaimers The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. Certain factual and statistical information (historical as well as projected) pertaining to Industry and markets have been obtained from independent thirdparty sources, which are deemed to be reliable. It may be noted that since RCAM has not independently verified the accuracy or authenticity of such information or data, or for that matter the reasonableness of the assumptions upon which such data and information has been processed or arrived at; RCAM does not in any manner assures the accuracy or authenticity of such data and information. Some of the statements & assertions contained in these materials may reflect RCAM s views or opinions, which in turn may have been formed on the basis of such data or information. Before making any investments, the readers are advised to seek independent professional advice, verify the contents in order to arrive at an informed investment decision. None of the Sponsor, the Investment Manager, the Trustee, their respective directors, employees, affiliates or representatives shall be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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