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Portfolio Management&
Mutual Funds
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ICICI Pru Eq & Deriv-Income Opt-Inst(G)
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Kapil Gupta

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DIVYA GUPTA
09BS0000711
SEC: B

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SNAPSHOT OF ICICI PRU EQ & DERIV-INCOME OPT-INST(G)

ICICI Prudential Asset Management Company enjoys the strong parentage of Prudential plc,
one of UK's largest players in the insurance & fund management sectors and ICICI Bank, a
well-known and trusted name in financial services in India. ICICI Prudential Asset
Management Company, in a span of just over eight years, has forged a position of pre-
eminence in the Indian Mutual Fund industry as one of the largest asset management
companies in the country with average assets under management of Rs. 69,754.78 Crore (as
of September 30, 2010). The Company manages a comprehensive range of schemes to meet
the varying investment needs of its investors spread across 230 cities in the country.

OBJECTIVE OF THE SCHEME :

To generate low volatility returns by using arbitrage and other derivative strategies in equity
markets and investments in short-term debt portfolio.

SUMMARY:

Fund Name ICICI Prudential Mutual Fund

Scheme Name ICICI Pru Eq & Deriv-Income Opt-Inst(G)
AMC ICICI Prudential Asset Management Company Limited
Type Open ended scheme
Category Arbitrage – Equity
Launch Date 05-Jan-07
Fund Manager Chintan Haria , Manish Banthia
Face Value 10
Custodian HDFC Bank Limited
Net Assets (Rs. cr) 90.94

PORTFOLIO COMPOSITION:

Market % of Net
Scheme Name Company Name Sector Name
Cap Assets
ICICI Pru Eq &
Deriv-Income Opt- ABG Shipyard Ltd Ship Building MID 2.64
Ret(G)
ICICI Pru Eq &
Deriv-Income Opt- Bharat Forge Ltd Castings/Forgings LARGE 1.78
Ret(G)
ICICI Pru Eq &
Century Textiles & Cement & Construction
Deriv-Income Opt- MID 0.74
Industries Ltd Materials
Ret(G)
ICICI Pru Eq & Fortis Healthcare Ltd Hospital & Healthcare LARGE 7.78
Deriv-Income Opt- Services
Ret(G)
ICICI Pru Eq &
Deriv-Income Opt- GTL Ltd IT - Software MID 8.71
Ret(G)
ICICI Pru Eq &
Gujarat State Petronet
Deriv-Income Opt- Gas Transmission/Marketing LARGE 1.89
Ltd
Ret(G)
ICICI Pru Eq &
Deriv-Income Opt- HDFC Bank Ltd Bank - Private LARGE 2.90
Ret(G)
ICICI Pru Eq &
Deriv-Income Opt- HDFC Ltd Finance - Housing LARGE 0.02
Ret(G)
ICICI Pru Eq &
Cement & Construction
Deriv-Income Opt- India Cements Ltd MID 4.53
Materials
Ret(G)
ICICI Pru Eq &
Deriv-Income Opt- Ispat Industries Ltd Steel/Sponge Iron/Pig Iron MID 3.37
Ret(G)
ICICI Pru Eq &
Deriv-Income Opt- Lupin Ltd Pharmaceuticals & Drugs LARGE 0.18
Ret(G)
ICICI Pru Eq &
Mahindra &
Deriv-Income Opt- Automobiles-Tractors LARGE 3.65
Mahindra Ltd
Ret(G)
ICICI Pru Eq &
Deriv-Income Opt- Meractor Lines Ltd Shipping SMALL 0.41
Ret(G)
ICICI Pru Eq &
Deriv-Income Opt- Orbit Corporation Ltd Construction - Real Estate SMALL 2.41
Ret(G)
ICICI Pru Eq &
Oriental Bank of
Deriv-Income Opt- Bank - Public LARGE 2.00
Commerce Ltd
Ret(G)
ICICI Pru Eq &
Pantaloon Retail
Deriv-Income Opt- Retailing LARGE 6.36
(India) Ltd
Ret(G)
ICICI Pru Eq & Power Grid
Power
Deriv-Income Opt- Corporation of India LARGE 1.31
Generation/Distribution
Ret(G) Ltd
ICICI Pru Eq &
Engineering - Industrial
Deriv-Income Opt- Praj Industries Ltd SMALL 1.75
Equipments
Ret(G)
ICICI Pru Eq &
Power
Deriv-Income Opt- PTC India Ltd MID 4.39
Generation/Distribution
Ret(G)
ICICI Pru Eq &
Reliance Power
Deriv-Income Opt- LARGE 2.52
Infrastructure Ltd Generation/Distribution
Ret(G)
ICICI Pru Eq & State Bank of India Bank - Public LARGE 2.78
Deriv-Income Opt- Ltd
Ret(G)
ICICI Pru Eq &
Steel Authority of
Deriv-Income Opt- Steel/Sponge Iron/Pig Iron LARGE 3.54
India Ltd
Ret(G)
ICICI Pru Eq &
Telecommunication - Service
Deriv-Income Opt- Tata Teleservices Ltd MID 0.28
Provider
Ret(G)
ICICI Pru Eq &
Television Eighteen TV Broadcasting & Software
Deriv-Income Opt- SMALL 2.04
India Ltd Production
Ret(G)
ICICI Pru Eq &
Deriv-Income Opt- UCO Bank Ltd Bank - Public LARGE 2.69
Ret(G)
ICICI Pru Eq &
Cement & Construction
Deriv-Income Opt- Ultratech Cement Ltd LARGE 1.10
Materials
Ret(G)
ICICI Pru Eq &
Deriv-Income Opt- Unitech Ltd Construction - Real Estate LARGE 0.07
Ret(G)

Market cap-wise Allocation Style

Average Mkt Cap (Rs Cr) 26156.20
Market Capitalization % of Portfolio
Large 40.55
Mid 24.67
Small 6.60

In / Out

What's in as on 31-Dec-2010 What's out as on 31-Dec-2010

Mkt Mkt
Company Name Holdings Company Name Holdings
Value Value
  (Rs.Cr) %   (Rs.Cr) %
SBI 2.52 2.78 LIC Housing Finance 0.00 0.56
SAIL 3.22 3.54 Adi Bir Nuv 0.00 1.83
HDFC Bank 2.63 2.90 Rel. Inds 0.00 2.13
Lupin 0.16 0.18 Videocon Inds. 0.00 0.20
KS Oils 0.00 5.03
Welspun Corp 0.00 7.07
Syndicate Bank 0.00 0.56
GeeCee Ventures 0.00 1.01
In the recent past the above mentioned changes took place in the portfolio.

About the Fund Manager – Chintan Haria

Mr Chintan Haria is a commerce Graduate from Sydenham College of Commerce & Economics
Mumbai and is a qualified CA. He has also done his CFA from ICFAI. He was designated as
Senior Manager at ICICI Prudential AMC Ltd. He was promoted in May 2010 as AVP –
Investments at ICICI Prudential Asset Management Company Limited.

Active/ Passive

Active management (also called active investing) refers to a portfolio management strategy
where the manager makes specific investments with the goal of outperforming an investment
benchmark index. He is exploiting the market inefficiencies by purchasing securities he thinks
are undervalued or by short-selling securities that are overvalued or both. Contrary to the popular
belief, active management can also create portfolios with lower volatility (or risk) than the
benchmark index.

Passive management (also called passive investing) is a financial strategy where a fund manager
takes as few portfolio decisions as possible. The objective is to mirror the market returns, reduce
the transaction costs, including the incidence of capital gains tax and eliminate the human factor
in the management as much as possible. One of the most popular methods is to mimic the
performance of externally specified market indices, by investing the money in securities in the
same percentage of holdings as they are in the index. These are popularly known as Index Funds.
Basically, an index fund manager is not supposed to do anything but just sit tight.

In this case, it can be said that the fund manager has adopted an active management style of fund
management because there has been shuffling in the portfolio as per the market conditions in
order to outperform the benchmark returns. Moreover, the investment is not purely based on an
index with which its returns are benchmarked.
RATIOS:

Statistical Ratios
Standard Deviation [%] 0.1237
Beta [%] -0.0596
Sharpe Ratio [%] 0.0992

Turnover ratio[%] 0.000

The turnover ratio represents the percentage of a fund's holdings that change every year.To put
it simply, a turnover rate of 100 per cent implies that the fund manager has replaced his entire
portfolio during the period given.Technically, the turnover ratio is the lower of the total sales or
total purchases over the period divided by the average of the net assets.Higher the turnover ratio,
greater is the volume of trading carried out by the fund.

Turnover ratio is zero which implies that fund manager has not replaced the entire portfolio
during the period. We can say that the turnover ratio is not justified as the fund manager is not
able to outperform the returns of the benchmark index.

PERFORMANCE ANALYSIS

Performance

  1 Week 1 Month 3 Month 6 Month 1 Year 3 Year 5 Year Since INC

  [%] [%] [%] [%] [%] [%] [%] [%]
Scheme Return 0.07 0.91 2.53 4.71 6.46 6.14 NA 7.45
Category Avg 0.07 0.53 2.03 4.28 6.09 5.83 6.89 6.85
Category Best 0.20 1.00 3.18 8.04 12.75 7.05 7.20 9.75
Category Worst -0.78 -0.64 -0.99 2.52 4.53 2.01 6.29 4.81

*Equity - Returns upto 1 year are absolute and over 1 year are CAGR.
*Debt - Returns upto 1 year are annualised and over 1 year are CAGR.

NAV Details
NAV Date 06-Jan-11 Max Entry Load % 0.00
NAV [Rs] 13.35 Max Exit Load % 0.00
Buy/Resale Price [Rs] 13.28 52 Week High[Rs] 13.36 (04-Jan-11)
Sell/Repurchase Price [Rs] 13.35 52 Week Low[Rs] 12.52 (18-Jan-10)
NAV GRAPH:

MEASURES OF IMPROVING RISK RELATIVE RETURN

Risk relative Return = (Return on portfolio- Risk Free Rate of Return)/Beta

So Risk Relative Return can be improved if beta is decreased or if difference between return on
portfolio and risk free rate of return is increased. Risk Relative Return can also be improved by
buying the stocks with better return and lesser risk and selling the stocks which are performing
low and have high degree of risk. In the following manner the risk relative return can be
improved:

 Since the market has already rallied because of the large cap stocks, the fund manager
should increase the exposure in small and mid cap stocks as they rally after the large cap
stocks
 Considering the inflationary scenario, one should avoid banking stocks and reduce
exposure in them because of tight monetary policies
  Increase exposure in FMCG sector as they have a very low beta, it can help in improving
risk relative returns
 Increase weightage of hospital and healthcare sector as they have a very low beta and
have provided better returns than the market. Moreover, there is something good every
year for this sector from the government side too.

HEDGED PORTFOLIO
Pure Hedge Portfolio is a portfolio that is fully hedged. The risk of losses is minimal. This
Scheme is a mixture of equity, debt and money market instruments. The different types of
instruments are exposed to different types of risks which are as follows:
 equity shares are exposed to stock price fluctuation risk,
 Interest bearing government debt securities are exposed to interest rate fluctuation which
is known as interest rate risk.
Since the portfolio is having almost no exposure in debt market, we need to focus on equity
hedging.
Bibliography

 http://business.rediff.com/report/2010/may/03/perfin-how-to-allocate-active-and-
passive-investing.htm

 http://www.mutualfundsindia.com/amc_snapshot.asp

 www.sbimf.com

 http://www.thinkplaninvest.com/2010/02/equity-linked-savings-schemeelss-us-80c/

 http://www.zonkerala.com/articles/equity-linked-saving-scheme.htm

 http://www.iloveindia.com/finance/mutual-funds/equity-mutual-funds.html

 http://www.valueresearchonline.com/funds/funddetails.asp?schemecode=198

 http://www.sbimf.com/product_details.asp?productid=15

 http://www.cfstradecity.in/MutualFund/SnapShot.aspx?
id=2&Fund=400027&Category=8&SchemeCode=2815

 http://www.sbimf.com/downloads_factsheets.asp