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Templet

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Reflation Theory may work in future. Be a Winner by investing in ... REFLATION THEORY MAY WORK IN FUTURE. Low level of Local Investment. Ownership of equities ... – PowerPoint PPT presentation

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Title: Templet


1
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2
UTI MUTUAL FUND
  • Largest MF in the Country with AUM of About Rs.
    25228 crores (as on Dec 31, 2005)
  • Equity AUM of approx. Rs 12,100 crores
  • 55 Domestic Funds, 5 Offshore Funds
  • 29 Equity, 24 Debt and 2 Balanced Domestic Funds
  • Dedicated Equity Research Cell to assist Fund
    Managers
  • Comprehensive risk management practices
  • Most extensive marketing network - 67 UFCs, 340
    District representatives

3
INDIAN ECONOMY STOCK MARKET
4
STRONG ECONOMIC GROWTH
  • India among the fastest growth economies of the
    world
  • Domestically driven economy
  • India Getting Younger and Richer
  • Economic growth led by Consumption
  • Corporate India getting Healthier
  • CAPEX in a competitive environment
  • Infrastructure Spending on an anvil
  • Reflation Theory may work in future

Be a Winner by investing in UTI Leadership Fund
5
ECONOMIC GROWTH AND EQUITY MARKETS
  • During Periods of Strong Economic Growth, Equity
    Markets Perform Strongly
  • Two Prominent Cases
  • Domestic Investment Led Growth in the US
    A(1948-1964)
  • Export Led Growth in Japan (1970-1985)
  • Several Countries Have Gone Through Similar
    Inflection Periods
  • Chinese Growth Led By Manufacturing Outsourcing
  • Indian Growth Led By Services Outsourcing and
    Domestic Demand Driven By Increased Consumption
    and Current Low Leverage

6
INDIA VALUATION COMPARABLE TO EMERGING MARKET
Global Indices YTD trends
Valuations much lower than at historic
peaks Indian economy and companies have
higher sustainable growth rates Indian economy
is relatively more insulated from a global
slowdown Indian companies have better operating
and financial parameters India is quoting at
about 14 times FY07 earnings
Relative valuations
Source Bloomberg
7
LEADERSHIP CONCEPT CHARACTERSTICS
8
UTI LEADERSHIP EQUITY FUND - CONCEPT
  • Investing in stocks that are Leaders in their
    respective industries/ sectors /sub-sectors
  • Leaders are those companies having
  • Higher market shares
  • Strong brand equity
  • Better operating efficiencies
  • Better access to capital
  • Significant / sustainable competitive advantages

9
LEADERS HAVE A PROVEN TRACK RECORD
  • Tend to have long history of operations
  • Experience of going through economic cycles
  • Achieving leadership position by building
    economies of scale and Sustainable competitive
    advantage

10
HIGHER DEGREE OF TRANSPARENCY
  • High degree of corporate governance
  • Professionally driven companies
  • Management actions directed to enhance
    shareholders value
  • Corporate Governance and Equity Prices by
    Paul Gompers of Harvard and Andrew Metrick of the
    University of Pennsylvanias Wharton School found
    that firms with stronger shareholder rights had
    higher firm value, higher profits, higher sales
    growth.

11
MODEL PORTFOLIO OF LEADERS - A BACK TESTING
  • Portfolio of Leaders
  • A portfolio of leaders was constructed by
    choosing 35 companies from 34 sectors/sub-sectors
    who are leaders in the respective
    sector/subsectors.
  • CNX Mid Cap Indices
  • It consist of companies which are not leaders in
    respective sectors
  • Stock market performance and Financial
    performance of Portfolio of leaders are compared
    with indices containing non - leaders

12
LEADERS DO WELL IN RISING MARKET
CNX Midcap index (200) is discontinued after July
2005
Leaders give higher return in the rising market
13
LEADERS PROTECT THE GAINS IN FALLING MARKET
CNX Mcap Index (100) is available from Jan 2001
CNX Midcap index (100) is available from Jan 2001
Leaders decline less in the falling market
14
LEADERS DO WELL OVER SHORT AND LONG PERIODS
Be a winner by staying invested with Leaders
15
LEADERS DO WELL COMPARED TO BROADER MARKET
Be a winner by staying invested with Leaders
16
LEADERS DO WELL DURING ECONOMIC UPSWING
Rs in crores
Period of 2000-05 was marked with economic
upswing with Indias GDP has grown in excess of
6
Leaders are major beneficiaries during Economic
upswing
17
LEADERS - ABILITY TO WITHSTAND DOWNTURNS
Rs in crores
Period of 1995-2000 was marked with economic
slowdown after liberalization of economy in 91-92
Leaders can withstand tremors of the economy
better
18
LEADERS DO WELL EVEN DURING FULL ECONOMIC CYCLE
  • 1995 - 2000 was a period of slowdown while
    2000 - 2005 was period of economic upswing

Growth in sales, Op. profit and PAT of companies
in Portfolio of Leaders have been higher
compared to that of non-leaders over last ten
year period
Leaders have sustainable earnings and hence give
sustainable returns
19
EARNINGS OF LEADERS HAVE LOW VOLATILITY
Sales Growth
PAT Growth
PAT Growth
Leaders have sustainable earnings and hence give
sustainable returns
20
LEADERS ARE GLOBALLY COMPETITIVE
  • Liberalisation of economy in 1991
  • Peak custom duty cut from over 100 in 93 to
    about 20 in 2005.
  • Operational and financial restructuring leading
    to higher margins.
  • OPM improved for companies in portfolio of
    leaders from 6.28 in 1993 to 13.82 in 2005
  • NPM improved for portfolio of leaders from
    5.05 in 1993 to 11.32 in 2005

21
INDIAN LEADERS CAN BE TOMORROWS GLOBAL MNCS
Be a winner by staying invested with Leaders
22
UTI LEADERSHIP EQUITY FUND
23
A FUND TO CAPITALISE ON GROWING ECONOMY
  • Secular underlying growth story of Indian Economy

Global Competitiveness
Leaders performing well in future
Quality Portfolio at reasonable valuations
24
SCHEME FEATURES
  • INVESTMENT OBJECTIVE
  • Long-term capital appreciation and/or dividend
    distribution.
  • Investing in stocks that are Leaders in their
    respective industries / sectors / sub-sectors.
  • The investments restricted to the top five
    leading companies of an industry / sector /
    sub-sector in terms of sales turnover / market
    share.
  • BENCHMARK INDEX S P CNX Nifty
  • ASSET ALLOCATION

Invest in Leadership Fund from a Leader in Mutual
Fund Industry
25
INVESTMENT STRATEGY
  • Stock Selection
  • An industry or sector that the Fund Manager
    feels will outperform others will be selected and
    then leading companies within that industry /
    sectors will be picked.
  • Portfolio of the fund would be focussed
  • Number of stocks around 25-30.
  • To invest 75-80 in leaders and 20-25 in
    potential leaders.

Single stroke to success is being with Leaders
26
FUND POSITIONING
Return
Risk
Leadership fund can give higher and sustainable
return
27
SCHEME DETAILS
  • Type of Scheme Open Ended Diversified Equity
    Fund
  • Options Available
  • Growth Option
  • Dividend Option with Payout and Reinvestment
    facilities
  • Sale and Repurchase Price
  • During the NFO, the units of the fund will be
    sold at Rs. 10 subject to Load applicable.
  • The Scheme will offer purchase and redemption of
    units at NAV based prices on every business day
    on an ongoing basis, commencing from 28th
    February 2006.
  • Investment Amount
  • Minimum initial investment is Rs.5,000/-.
    Subsequent minimum investment under a folio is
    Rs.1,000/- and in multiples of Re.1/- thereafter
  • Facilities Available Systematic Investment Plan
    (SIP) and Automatic Trigger facilities

Be a Winner by investing in UTI Leadership Equity
Fund
28
SCHEME DETAILS (Contd.)
Load Structure
NFO Opens On 9th January 2006 NFO Closes On
30th January 2006
Be a Winner by Investing in UTI Leadership
Equity Fund
29
RISK FACTORS
  • All investments in Mutual Funds and
    securities are subject to market risk and the NAV
    of the Funds may go up or down depending on the
    factors forces affecting the securities market.
    Past performance of the Sponsor/Mutual Fund/
    Scheme(s)/AMC is not necessarily indicative of
    the future results. UTI Leadership Equity Fund is
    just the name of the scheme and does not in any
    manner indicate the quality of the scheme, its
    future prospects or returns. The scheme is
    subjected to the risks relating to interest rate,
    liquidity, securities lending, investment in
    overseas market, trading in equity and debt
    derivatives. There may be instances where no
    income distribution could be made. Please read
    the Offer Document carefully and do consult your
    financial advisor before investing.

30
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31
INDIA AMONGST THE FASTEST GROWING ECONOMIES
Growth has been accelerating in each
decade Industry services (78 of GDP) growing _at_
8 Impact of agriculture on overall growth is
steadily reducing Per capita income has grown by
7 CAGR over the past decade and is projected to
cross 1,000 by the end of the decade
Source Var Brokerge housess
32
INDIA GETTING YOUNGER AND RICHER
  • Explosive effect of rising Per capita Income
    Currently at USD 750
  • Historically, at 1 growth, PCI doubled in a life
    time
  • At current 4 growth, PCI will reach USD 1000 in
    8 years
  • PCI of top 20 of population (gt200mn people) is
    growing at 9 - doubling in 8 years

Increasing consuming group
Source planning commission of India
Young and richer India has huge implication in
terms of multiplier effect on consumption and
economic growth
33
ECONOMIC GROWTH LED BY CONSUMPTION
Consumer loans/ GDP
Mortgages/ GDP
Credit cards/ GDP
Other retail loans/ GDP
Source RBI, Var brokerage house
Indian economy is domestically driven economy
(85 from dom. Mkt.) unlike emerging markets
which are linked to export growth
34
CORPORATE INDIA GETTING HEALTHIER
Growing Profitability
Peak Rate of Custom Duty Operating in a
Competitive environment
Efficiently managed Working Capital/ Sales
Healthy balance sheets
Source CMIE
35
CAPEX IN A COMPETITIVE ENVIRONMENT
Source CMIE
Duties (RHS)
  • Key differences between the capex cycle of
    1995-97 and the current one
  • Current capex in a competitive environment,
    duties down to WTO levels
  • Interest rate differentials with regional
    economies have shrunk, making India more
    competitive
  • Current capex also aimed at servicing export
    markets given Indias emerging competitiveness in
    manufacturing

36
INFRASTRUCTURE SPENDING ON ANVIL
Infrastructure investments the key driver to
feed the imminent capex boom and drive industrial
growth to double digit
37
REFLATION THEORY MAY WORK IN FUTURE
Ownership of equities
Low level of Local Investment
Ownership of equities
Source Var Brokerage Houses
38
INDIA VALUATION - REASONABLE RELATIVE TO GROWTH
Sensex 9300
14.0x FY07E of Rs.668 16.6x FY06E of Rs.562
Source Bloomberg
39
Dow Jones performance
40
Nikkei performance
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