Daily Returns

As a part of this project, the daily returns of the fund were calculated for 5 years. The following
observations were made:

a. The maximum observed return was 0.033991317, and it was observed on 10-09-2013.
b. The minimum observed return was -0.066792567 and it was observed on 24-08-2015.
c. The average return of the fund over the last 5 years is 0.000617.
d. The returns varied between -0.02 and 0.02 for the majority of the period, with few occasions
where the return was higher than 0.02 or lower than 0.02.

Returns over time

0.04

0.02

0
11/1/2012 11/1/2013 11/1/2014 11/1/2015 11/1/2016
-0.02

-0.04

-0.06

-0.08

Returns over time

0.04

0.02

0
4/1/2012 8/14/2013 12/27/2014 5/10/2016 9/22/2017 2/4/2019
-0.02

-0.04

-0.06

-0.08
Normality of returns

The normality of the returns for the fund were checked for normality, using e-views. The following
indicators were used to test for normality:

i. Q-Q Plot- In a normal distribution, the Q-Q plot shows a clustering of values around a 45-
degree inclination. The returns show some deviation, while not wholly conclusive,
requiring further testing.
ii. Shapiro-Wilkes- The p-value in the shapiro-wilkes test for normality has to be greater
than 0.05, while the returns exhibited a p-value of <0.0001. The same was observed in
Kolmogorov-Smirnov, Cramer-von Mises, and Anderson-Darling
iii. Skewness- In a normal distribution, the skewness observed in the graph is zero, while
the dataset exhibits a skewness value of -0.503
iv. Kurtosis- In a normal distribution, the kurtosis observed is 3, while the dataset exhibits a
kurtosis of 5.92
v. Jarque Bera- In a normal distribution, the Jarque Bera estimate has to be zero, with a
significant probability (>0.05). The returns exhibit a Jarque Bera estimate of 487.82, with
a probability of 0.

Tests for Normality

Test Statistic p Value
Shapiro-Wilk W 0.977161 Pr < W <0.0001
Kolmogorov-Smirnov D 0.052254 Pr > D <0.0100
Cramer-von Mises W-Sq 0.841091 Pr > W-Sq <0.0050
Anderson-Darling A-Sq 4.371295 Pr > A-Sq <0.0050
All of these observations point to the same conclusion- The returns of the fund are non-normal.
Sector-wise Holding Patterns-

The Sector-wise holding across the years (from 2010 to 2017) has been analysed. The key
observations are as follows:

The holding pattern of industries with a standard deviation greater than one were analysed, as those
sectors with a standard deviation less than 1 were invested in for a maximum of 3 years, and even in
those cases, the holding percentage was too small to add any meaningful analysis.

% Holdings in various sectors over the years:

%Holding in Banks
45
40
35
30
25
20
15
10
5
0
2010 2011 2012 2013 2014 2015 2016 2017

Banks are the backbone of any economy. It is understandable that the fund has stayed invested in
the Banking Sector over the duration of our observation, as it is one of the fastest growing sectors,
and has seen reforms to increase private investment into the sector, in 2016 and 2017, which
explains the increase in the holding pattern in those years.

%Holding in Textiles
18
16
14
12
10
8
6
4
2
0
2010 2011 2012 2013 2014 2015 2016 2017

The holding pattern for textiles is odd. In the year 2014, it was expected that textile exports from
India would increase, following a push for correcting the foreign deficit. However, the expectations
were not met, and thus the sector was divested in. 2017 saw a nominal shareholding, which we
interpret to be for the sake of diversification.

%Holding in Computers
25

20

15

10

0
2010 2011 2012 2013 2014 2015 2016 2017

Computers has historically been a strong sector to invest in. The holding pattern shows the same,
with a decreasing trend from 2015, and a sharp drop in 2014. The sharp drop can be explained by
the stock market crash in 2014, which greatly affected the IT services sector, thus reflected in the
low holding pattern. 2015 brought with it an increased confidence in the sector, as recovery from
the subprime crisis seemed imminent, but the holding pattern has gradually come down, in favour of
a more diversified portfolio, and decreasing dependence on the IT industry, which is sensitive to
global shocks.

%Holding in Cigarettes
10
9
8
7
6
5
4
3
2
1
0
2010 2011 2012 2013 2014 2015 2016 2017

The cigarette company that was invested in was ITC. ITC is a diversified company with a large market
share in FMCG. The holding was reduced in 2016 and 2017 due to market shocks in FMCG due to the
implementation of GST and Demonetisation measures, which greatly affected the cigarette and
FMCG Sectors.
 %Holding in Automobiles
16

14

12

10

0
2010 2011 2012 2013 2014 2015 2016 2017

Automobiles are also a strong sector to invest in, with large holdings in the sector throughout the
years. Surprisingly, this sector’s holdings were not affected by the GST and demonetisation
measures.

%Holding in Personal Care

9
8
7
6
5
4
3
2
1
0
2010 2011 2012 2013 2014 2015 2016 2017

Personal Care has slowly emerged as an investment opportunity in the last few years, with a few
major players finally entering the stock market. The holding pattern was greatly increased in 2016
with the expectation of GST reducing the taxation on these products. However, demonetisation had
a much greater effect on the industry, resulting in a reduction in the holding.
 %Holding in Engineering
8

0
2010 2011 2012 2013 2014 2015 2016 2017

Engineering is a sector that is closely tied to the real estate industry in the country. The sector was
invested in strongly in 2012, at its peak. However, the global recession led to a crash in real estate
prices in 2014, which led to a lot of engineering and real estate companies being shut down. The
sector recovered in 2015, with the holding decreased in 2016 and 2017, due to demonetisation,
which greatly affected the industry, and also in the interest of diversification.

%Holding in Steel
8

0
2010 2011 2012 2013 2014 2015 2016 2017

Steel used to one of the best industries to invest in, as seen in the previous holdings. However, the
financial health of most steel companies was terrible, which came to light in 2015 and 2016. With
many steel companies applying for insolvency, and many yet suffering from sick financials, the fund
did not invest in the sector since 2015.
 %Holding in Mining/Metals/Minerals
9
8
7
6
5
4
3
2
1
0
2010 2011 2012 2013 2014 2015 2016 2017

In the absence of Steel as a solid investment opportunity, the fund explored other metals and mining
companies as an option. These companies took a hit due to the global recession, but have since
recovered.

%Holding in Electric Equipment

7

0
2010 2011 2012 2013 2014 2015 2016 2017

Electric companies such as HMT have always been solid investments, with electrical companies
leading the way in the manufacturing sector. However, the global recession greatly affected this
sector, leading to a reduction in the holding. The make in India scheme in 2016 has bolstered
domestic production, with large capital infusion taking place, increasing investor confidence,
resulting in an increased holding pattern.
 %Holding in Refineries
12

10

0
2010 2011 2012 2013 2014 2015 2016 2017

%Holding in Oil Drilling/Allied Services

7

0
2010 2011 2012 2013 2014 2015 2016 2017

What is interesting to note is that while Oil Drilling and refineries are related industries, the holding
pattern in the fund does not mirror one another. While Oil Drilling has been divested in 2016 and
2017, there has been a reduction in the holdings of refineries. This is mainly due to a fall in oil prices
over the last 2 years, with reduced demand for fresh drilling, while refineries continued to maintain
stocks of oil.
 %Holding in Entertainment
7

0
2010 2011 2012 2013 2014 2015 2016 2017

2016 was the year of IPOs in the entertainment Industry. There were great expectations for the
sector, with players such as adlabs entering the ring. However, performance fell flat of the
expectations, which resulted in a reduction in the holding for the sector in 2016.

%Holding in Finance
6

0
2010 2011 2012 2013 2014 2015 2016 2017

The Finance sector has seen turbulence in the last two years, with the financial sector suffering due
to poor financials of the companies they invested in. This has led to reduced investor confidence in
the sector.
 %Holding in Telecom
6

0
2010 2011 2012 2013 2014 2015 2016 2017

While Telecom has not been heavily invested in over the years, it peaked at 5.2%, in 2011. The
holding has reduced in the last two years, due to the disruption brought about by Reliance Jio, which
has majorly affected the financial performance of the incumbents, Airtel, Vodafone and Idea.

%Holding in Power Generation and Supply

6

0
2010 2011 2012 2013 2014 2015 2016 2017

Power Generation and Supply is dominated by State agencies, which garnered a lot of investor
confidence at one point of time. However, the companies soon became financially unstable, mainly
due to poor management practices and an unwillingness to modernise their operations. Thus, it is no
longer a sound investment opportunity, as reflected in the holding pattern.
 %Holding in Diamond Cutting/Jewellery
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2010 2011 2012 2013 2014 2015 2016 2017

Diamond Cutting and Jewellery is a fairly interesting industry with an interesting holding pattern
over the years. The previous years the sector was mainly held for diversification, but with the entry
of Titan into the stock markets the holding increased sharply in 2017.

%Holding in Pharmaceuticals
10
9
8
7
6
5
4
3
2
1
0
2010 2011 2012 2013 2014 2015 2016 2017

Pharmaceuticals are a strong industry to invest in, with a large portion of the revenue derived from
foreign sales. The growth of Sun Pharma, and increased investment saw a spike in the holding
pattern. However, the holding has reduced in the last two years, due to uncertainty in the United
States Drug Market, which is a major playground for the pharmaceuticals sector, as Donald Trump
began to restrict import of drugs into the US.
 %Holding in Cement
3.5

2.5

1.5

0.5

0
2010 2011 2012 2013 2014 2015 2016 2017

The Cement sector has seen a lot of fluctuation in holding. The main reason it was held was for
diversification, with other sectors such as textiles and power generation and diamond
cutting/jewellery replacing it in some time periods, as greater growth was expected in those
industries. The cement sector is also closely tied to the engineering, steel and real estate sectors and
thus follows the market for those sectors closely. Macro level market shocks to those sectors
adversely affected the cement industry and thus the holding pattern.
Market Capitalisation

The companies with the largest market capitalisations, that the fund has invested in are as follows:

STOCKS Market Value

MARUTI SUZUKI INDIA LTD 49,49,58,622
PNB HOUSING FINANCE LTD 43,93,06,800
INDIAN OIL CORP LTD 42,96,76,000
BAJAJ FINANCE LTD 42,20,22,400
BHARAT PETROLEUM CORP LTD 41,84,40,000
KOTAK MAHINDRA BANK LTD 41,61,60,400
INDUSIND BANK LTD 41,59,08,400
HDFC STANDARD LIFE INSURANCE 41,49,63,200
RBL BANK LTD 40,77,60,000
SOUTH INDIAN BANK LTD 39,92,80,000
PETRONET LNG LTD 39,35,85,800
ZEE ENTERTAINMENT ENTERPRISE 38,86,20,000
TITAN CO LTD 37,31,16,800
ASTRAL POLY TECHNIK LTD 33,95,41,800
KAJARIA CERAMICS LTD 33,86,96,400
BHARAT ELECTRONICS LTD 33,83,06,000
SECURITY AND INTELLIGENCE SE 33,04,84,200
MRF LTD 32,49,77,288
SKIPPER LTD 28,00,25,600
SAGAR CEMENTS LTD 25,04,21,631
DOLLAR INDUSTRIES LTD 24,77,37,600
ERIS LIFESCIENCES LTD 23,11,57,500
COGNIZANT TECH SOLUTIONS-A 22,16,16,595
MINDA INDUSTRIES LTD 21,41,79,000
RANE HOLDINGS LTD 9,56,95,596