Monthly Market Outlook July 2019 Monthly Market Outlook May 2019 Equity & Fixed Income Outlook The information contained herein is solely for private circulation for reading / understanding of registered Advisors / Distributors and should not be circulated to investors/prospective investors.
Global Indices Performance Returns Performance - June 2019 • Russian markets rose 7.3% during the month owing to a rise Returns (%) 8 7.3 7.2 6.5 6.4 6.1 5.7 in crude prices (Russia’s key 6 4.8 4.4 4.1 3.9 3.7 3.3 2.8 2.4 2.2 export) and on easing tensions 4 of US sanctions on Russia. 2 • Globally, markets ended in a 0 positive terrain except India -2 -0.8 which declined by 0.8%. The markets were in the Russia consolidation phase as the focus US shifted towards the upcoming budget and measures to counter Singapore growth concerns. France Hong Kong Germany Europe South Korea Brazil Switzerland UK Japan China Indonesia Taiwan India Germany - DAX Index; China - SSE Composite Index; France - CAC 40 Index; Japan - Nikkei; Eurozone - Euronext 100; Hong Kong - HangSeng; US - Dow Jones; Singapore - Strait Times; Russia - RTS Index; Indonesia - Jakarta 2 Composite Index; U.K. - FTSE; South Korea - Kospi; Brazil - Ibovespa Sao Paulo Index; Indonesia – Jakarta Composite Index; Switzerland – Swiss Market Index; Taiwan – Taiwan Stock Exchange Corporation; India – S&P BSE Sensex; Returns in % terms. Data Source: MFI & ACEMF; Returns are absolute returns for the index calculated between May 31, 2019 – June 30, 2019. Past performance may or may not be sustained in future The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Sectoral Indices Performance - India Returns Performance - June 2019 Returns (%) 8 5.8 4.4 3.3 • Power sector outperformance 4 was largely driven by decline in overdues by few power 0 0.0 generating companies -4 0.0 -0.3 -0.6 -0.7 -1.2 -1.2 -1.9 -2.7 -2.9 -3.1 -8 -5.1 -5.7 • Oil & Gas Sector underperformed owing to low CD refining margins and Power moderation of margins on a Metal YTD basis Realty IT CG Finance Bankex FMCG Infra Basic Materials Telecom Auto HC Energy Oil & Gas All indices are of S&P BSE and carry the prefix of S&P BSE; Abbreviated CD - S&P BSE Consumer Durables; CG - S&P BSE Capital Goods; FMCG - S&P BSE Fast Moving Consumer Goods; HC - S&P BSE Health Care; Infra. - S&P BSE 3 India Infrastructure; IT - S&P BSE Information Technology, NBFC – Non-banking Finance Companies. Data Source: MFI, ACEMF ; Returns are absolute returns for the TRI variant of the index calculated between May 31, 2019 – June 30, 2019; YTD – Year To Date. Past performance may or may not be sustained in future The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
OUR EQUITY OUTLOOK: NEUTRAL OUTLOOK FOR SHORT TERM. POSITIVE OUTLOOK FOR LONG TERM. 4 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Global & Domestic Macro Scenario 5 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Short Term Concerns Slowdown in Rise in Crude Oil Global Growth Prices Geo-Political Tensions i.e. US -China Trade Issues, US-Iran Issues Consumption Slowdown & Ongoing Agrarian Crisis Slow Progression Burgeoning Fiscal of Monsoon Deficit 6 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Global Growth • In the US, weakness is • China is looking at a calibrated • European Commission projects currently seen in Housing, Car weakening in Yuan to Eurozone GDP to grow at 1.2% Sales & Manufacturing counterbalance the pain of US below the 1.9% growth in 2018 tariffs • Consumer Spending rose at • European Central Bank is now 1.2% in Q1, down from 2.5% in • The PMI reading for June was open to rate cuts and new Q4 2018 below 50 (49.4) lowest reading asset purchases since January indicating a • Fed Atlanta Projects US Q2 slowdown GDP is estimated to grow 2% (q/q) compared to 3% in the • New orders fell whereas exports quarter prior are showing a downward trend Source: Yes Securities. US – United States of America 7 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Global Bond Yields Total outstanding debt globally in negative yield zone is close to US $ 13.08 Trillion out of US $ 55 Trillion Negative Yield ($ Trillion) 13.08 14 13 12 11 10 9 8 7 6 5 Negative Yields ($ Trillion) Feb-17 Jun-17 Oct-17 Feb-18 Jun-18 Oct-18 Feb-19 Jun-19 Source: Barclays Research. Data as of July 03, 2019 8 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
German Bund 10 Year Yields German bund yields declined well below the ECB‟s deposit rate German Bund 10 Year Yields (%) 6 5 4 3 2 1 0 -1 ECB – European Central Bank. Source: Barclays Research. Data as of July 05, 2019 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors. German Bund 10 Year Yields (%) -0.36 Jul-01 Jul-03 9 Jul-05 Jul-07 Jul-09 Jul-11 Jul-13 Jul-15 Jul-17 Jul-19
Japan Government 10 Year Bond Yields Japan 10 Year Government bond is trading well below it‟s long term average Japan Government Bond Yields (%) 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 Japan Government Bond Yields (%) -0.15 Jul-01 Jul-03 Jul-05 Jul-07 Jul-09 Jul-11 Jul-13 Jul-15 Jul-17 Jul-19 Source: Barclays Research. Data as of July 05, 2019 10 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
World Market Cap – Equity Negative yields in the debt space, created a conducive environment for other aggressive assets like Equity despite valuations and growth concerns World Market Cap (US $ Trillion) 90 85 81.07 80 75 70 65 60 55 50 45 40 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 Source: Barclays Research. Data as of July 05, 2019 11 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Equity can turn volatile, if debt yields turn The show can positive (US 10 Year Yields) continue until the yields do not spike US 10-Y Yields back, like what happened during 3.8 Taper 2013 taper tantrums Tantrums 3.3 2.8 2.3 1.8 1.3 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 US – United States of America. Source: Barclays Research. Data as of July 05, 2019 12 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Domestic Growth Indian Economy slowed down in Q4FY19 to 5.8% from 6.6% in Q3FY19 and 7.7% in Q4FY18. Activities related to capital expenditure slowed down which led to the fall in GDP GDP Data GDP (%) 9.0% 7.0% 7.7% 8.0% 7.0% 6.6% 5.8% 8.0% Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Source: CRISIL Research; Data as of March 31, 2019; GDP – Gross Domestic Product 13 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Slow Progression of Monsoon Though the El-Nino conditions have reportedly weakened, the countrywide rainfall deficit stands at 33% on aggregate basis (June 1 - June 30), stoking further growth concerns Region wise Rainfall Trends - % Departure from Long Period Average (June 1 - June 30, 2019) All India Actual (mm) Normal (mm) % Departure from LPA East & North East India 112.1 166.9 -33% North West India 218.2 347.1 -37% Central India 51.0 75.3 -32% South Peninsula 117.3 169.2 -31% 112.8 160.2 -30% Source: J P Morgan; LPA – Long Period Average 14 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
High Frequency Indicators – Private Consumption Private Consumption showing a downtrend in growth 50% Auto Sales (YoY Growth) 40% 37.5% 30% 20% 10% 22.3% 0% YoY Growth (%)17.2% -6.7% Apr-181.6% -20.5% May-18 -10% Jun-18 Jul-18 -20% Aug-18 Sep-18 Oct-18-30% Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Domestic 2 Wheeler Sales (YoY Growth) Domestic Passenger Vehicle Sales (YoY Growth) 15 Source: Morgan Stanley Research. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
High Frequency Indicators – Air Traffic Number of Air Passengers Flying have been declining Year-On-Year YoY Growth 25% 21.7% Air Passengers Flown 20% 15% 15.6% 10% 5% -5.4% 0% -5% -10% Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 Source: Morgan Stanley Research. 16 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Crude Prices Crude oil prices have been on the rise +9% from the lows of June. This might lead to inflation and may also impact trade & current account deficit Brent Crude (in USD/bl) 80 70 66.6 60 53.8 50 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Source: CRISIL Research; Data as of June 30, 2019; GDP – Gross Domestic Product 17 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Equity Valuations Update: Indifferent towards Largecap , Midcap & Smallcap 18 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Narrow Rally for Nifty 50 Index Current Equity Market Performance is driven by select few growth stocks making value as a theme attractive Over the last 28 months, Nifty 50 Index performance (3000 Over the last 28 months, despite 3000 points rally in Nifty points rally) was driven by a handful stocks 50 Index, these constituents saw their market cap shrink Nifty* Gainers over last 28 Months (3000 points rally) Nifty* Losers over last 28 months (3000 points rally) Bajaj Finance 236% -64% Tata Motors Titan Company 215% -62% Yes Bank Reliance Industries Sun Pharma Bajaj Finserve 135% -38% Zee Entertainment Hindustan Unilever 132% -35% Vedanta Kotak Mahindra Bank 111% -34% Indiabulls Hsg Finance 86% -27% Eicher Motors HDFC Bank 84% -24% Coal India TCS 82% -20% Hero Motocorp 73% -17% IOCL ICICI Bank 70% -17% Britannia Industries 50% 100% 150% 200% 250% -70% -60% -50% -40% -30% -20% -10% 0% 0% All returns are in absolute terms. * Nifty 50 Index. Source: NSE; Returns Data is from Feb 16, 2017 to June 30 , 2019. Past performance does not does not guarantee future results. The stock(s) mentioned in this slide do not 19 constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in this stock(s). The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Nifty 50 Valuations & Earnings Growth Post the rally in the large cap space, valuations are fully priced in and earnings growth is yet to pick-up 30 Valuations Vs. Earnings Growth 50 Nifty 50 PE 25 40 Jun-19 30 EPS Growth YoY (%) 20 20 15 10 10 0 -10 5 -20 0 -30 Mar-07 Dec-08 Sep-10 Jun-12 Mar-14 Dec-15 Sep-17 Nifty 50 PE EPS Growth YoY (%) P/E: Price to Earnings. Source : Motilal Oswal, Data as of June 30, 2019 20 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Nifty Midcap Valuations Post the recent correction in the mid & small cap space (refer subsequent slide), we are no more negative on mid & small cap space. Nifty Midcap 100 Price to Book Value 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Nifty Midcap P/BV 1.96 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Nifty Midcap PBV Long Term Average PBV – Price to Book Value. Source : Motilal Oswal, Data as of June 30, 2019 21 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Market Cap Analysis Share in the Overall Market Cap (%) Index 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Mar-19 Jun-19 Top-100 79 79 75 74 71 79 77 78 79 78 81 75 74 72 65 70 73 73 101-250 9 11 12 12 13 11 12 13 13 14 13 14 15 15 16 16 16 16 Above 12 11 13 14 16 10 11 9 8 8 6 10 11 14 18 14 12.1 11.7 250 Top 100 indicates top 100 companies by market capitalization,101-250 indicates next 150 companies by market cap and above 250 indicates 251st onwards by marketcap. 22 Source : Kotak Research , Data as of June 30, 2019 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Divergence - Value Vs. Growth VALUE STOCKS GROWTH STOCKS Stock Name PE P/BV Stock Name PE P/BV SBI Bank NA 1.4 HDFC NA 2.8 NTPC 10.9 1.3 HDFC Bank NA 4.4 Bharti Airtel NA 2.2 Reliance Industries 19.2 2.0 Infosys 20.7 4.9 TCS 26.9 9.2 Power Grid 8.7 1.9 L&T 24.8 3.6 Hindalco 8.3 0.8 Bajaj Finance 53.9 10.9 ITC 26.7 5.7 HUL 64.7 49.7 Source : NSE India, Data as of July 05, 2019 23 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Valuations – Divergence between Growth and Value Stocks P/E ratio of MSCI India growth and MSCI India value indices, 2010-19 (%) 35 31.5 Value and special 30 situation themes expected to play out 25 due to significant 20 21.7 disconnect between price and value in many „Growth‟ and 15 „Value‟ stocks 10 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 MSCI Growth Index MSCI Value Index Source: Morgan Stanley; Data as of June 30, 2019 24 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
DECODING UNION BUDGET 2019-20 The information contained herein is solely for private circulation for reading / understanding of registered Advisors / Distributors and should not be circulated to investors/prospective investors.
Key Budget Announcements FPI – Foreign Portfolio Investors, FDI – Foreign Direct Investment, KYC – Know your Customer, NBFC – Non-Banking Financial Companies, RBI – Reserve Bank of India. Source: Budget Document 26 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Analysis Focus on Long Term Growth Government focus on fiscal discipline and low inflation indicates the More incremental equity on offer probability of further rate cuts. This measure is expected to revive growth. The proposal to increase public shareholding coupled with Government willing to go below 51% for select CPSEs could lead to an increase in India‟s weightage in global indices Investor Confidence Relaxation of FDI restrictions on certain sectors, easier KYC NBFC relief norms for FPIs & external borrowing is a positive for foreign flows Government guarantee for the purchase of high-rated pooled assets of up to INR 1trn indicates that the Government seeks to address the NBFC concerns Rich to get more taxed Surcharge on 2 Individual income tax categories – Taxable income of between INR 2-5 cr at 3% and INR 5 cr & above at 7%. Now the highest tax rate in India is 42%* FPI – Foreign Portfolio Investors, FDI – Foreign Direct Investment, NBFC – Non-Banking Financial Companies, CPSE - Central Public Sector Enterprises, MSCI - Morgan Stanley Capital International, KYC – Know Your 27 Customer.*Consult your tax advisor for more details on taxation and applicable tax . Source: Budget Document The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Impact on Sectors PSU Banks Consumption IT A Rs. 700 Bn recapitalization budget for No initiatives on boosting Increase in minimum public shareholding PSU banks and increase in free float due consumption. Hence less focus and a proposal to levy 20% tax on share to proposed rise in public shareholding buybacks may have a negative impact on would be positive for PSU Banks cash rich IT Sector NBFCs Housing Credit Guarantee for high rated NBFCs and For high end housing, higher income taxes for change in Housing Finance Companies regulator individuals earning Rs. 20 Mn. Is expected to to RBI shows a greater focus on the sector have a negative impact 28 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Case for Long Term Investing & Managing Volatility Reforms Reforms Continuity & Initiatives to ensure long term Implementation growth story remains intact Asset Allocation Implementation of reforms measures and the subsequent SIP for Wealth Creation results to take ~3-5 years. A minimum investment horizon of 3-5 years is recommended Short term volatility to prevail given the current economic scenario. Asset Allocation Schemes to benefit from volatility recommended Staggered investments over long term in the form of SIP in Equity Schemes may help in wealth creation 29 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Outlook – Asset Allocation, Value & Special Situations Theme Volatility may Equity accumulation, in prevail due to mid/small/multicaps, global and should be in a staggered domestic factors manner via SIP/STP Neutral stance on Recommend lump Value and special equities as valuations sum investment in situation themes look completely priced Asset Allocation expected to play in. However the outlook Schemes to benefit out during 2019 has improved. out of volatility 30 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Schemes to manage Volatility: Our Asset Allocation Bouquet These schemes aim to benefit from volatility and manage equity exposure based on valuations Debt Taxation Equity Taxation Debt Taxation ICICI Prudential ICICI Prudential ICICI Prudential Balanced ICICI Prudential ICICI Prudential ICICI Prudential Equity & Debt Fund Asset Allocator Fund* Regular Savings Fund* Equity Savings Fund Advantage Fund Multi-Asset Fund Conservative Equity Dynamic Asset Multi Aggressive Fund of Hybrid Fund Savings Allocation or Asset Hybrid Funds Allocation Net Equity– Fund Balanced Net Equity– Net Equity Level*: 10-25% Advantage Net Equity – 65-80% 0-100% Net Equity– 10-80% 15-50% Fund Net equity – 30-80% The asset allocation and investment strategy will be as per the Scheme Information Document, *These schemes will attract debt taxation. 31 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
ICICI Prudential Balanced Advantage Fund* S&P BSE Sensex Levels vis-a-vis ICICI Prudential BAF Net Equity Exposure (%) 40,000 Net Equity Net Equity 39,395Jun'19 80 35,000 77.4 77.7 45.9 ICICI Prudential Balanced Advantage Fund 75 30,000 29,183 35,965 70 25,000 Net Equity Exposure (%) 65 Sensex Levels 20,000 60 15,000 55 18,620 23002 50 Net Equity Net Equity 45 40 34.3 31.7 35 30 Mar'10 Apr'13 May'16 Sensex Level Net Equity Exposure % Source: BSE India & MFIE, Data as of June 30 2019. The in-house valuation model starts from March 2010 onwards. ICICI Prudential BAF stands for ICICI Prudential Balanced Advantage Fund. 32 * An open ended dynamic asset allocation fund. The asset allocation and investment strategy will be as per Scheme Information Document The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
ICICI Prudential Asset Allocator Fund# “Allocate between equity and debt at right time without tax impact*” ICICI Prudential Asset Allocator Fund is an open ended Fund of Funds which has a flexibility to invest across equity and debt schemes# Investment Universe: 33 •Up to 100% in equity mutual fund schemes managed by ICICI Prudential Mutual Fund or any other Mutual Fund(s) •Up to 100% in debt mutual fund schemes managed by ICICI Prudential Mutual Fund or any other Mutual Fund(s) Allocation between asset classes •The Scheme will be actively managed by experienced Fund Managers. •The Scheme allocates between equity and debt mutual fund schemes based on in-house valuation model. To hedge against inflation or in adverse market situations, the Scheme may invest up to 50% in gold mutual fund schemes. Note: Subscriptions under the dividend plan of the scheme have been discontinued w.e.f. March 06, 2019 *On change in allocation by the scheme. For more details on tax please consult with your tax advisor. The asset allocation and investment strategy will be as per Scheme Information Document. ) Investors may note that they will be bearing the recurring expenses of this scheme in addition to the expenses of the underlying Schemes in which the scheme makes investment. (# An open ended fund of funds scheme investing in equity oriented schemes, debt oriented schemes and gold ETFs/ schemes The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Schemes to benefit from Value & Special Situations Theme These schemes aim to create wealth over long term by investing in opportunities at reasonable valuations 01 ICICI Prudential Value Discovery Fund^ Value Fund with Equity Levels – 65 - 100% Fund of Funds ICICI Prudential India Opportunities Fund* 02 Special Situations Fund with Equity & Equity related instruments of special situations theme of around 80 - 100%. *An open ended equity scheme following special situations theme. ^An open ended equity scheme following a value investment strategy. The asset allocation and investment strategy of the schemes will be as 34 per the Scheme Information Document The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
ICICI Prudential India Opportunities Fund Situations that can be turned into opportunities (1) Special Situation due to temporary Crisis in a. Company b. Sectors c. Economy (2) Government (3) Global Events/Uncertainties Action/Regulatory Changes The investment strategy will be as per Scheme Information Document 35 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Schemes to benefit from growth story These schemes aim to benefit from the long term growth story ICICI Prudential ICICI Prudential Smallcap Fund* Multicap Fund# A Smallcap fund with A Multicap fund with equity levels: 65-100% equity levels: 65-100% GROWTH ICICI Prudential 36 Midcap Fund^ A Midcap fund with equity levels: 65-100% * An open ended equity scheme predominantly investing in small cap stocks. ^ An open ended equity scheme predominantly investing in mid cap stocks. # An open ended equity scheme investing across large cap, mid cap, small cap stocks. The asset allocation and investment strategy of the schemes will be as per the Scheme Information Document The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
ICICI Prudential Smallcap Fund Robust Investment Solid Research and Process Screening Process Young and agile No. of Stocks: 40 – 65 (AUM as on June 30, Smallcap Exposure: 70 – 90% 2019 is Rs. 368.62 Crs) of portfolio Portfolio Construction and Investment Strategy Large & Midcap Exposure: 10 – 30% for tactical allocation & liquidity purpose The asset allocation and investment strategy of the scheme will be as per the Scheme Information Document 37 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
ICICI Prudential Midcap Fund – Investment Universe Compounders with Structural Cyclical Stable Growth Growth Growth Long Term Wealth Creators Long Term Wealth creators Tactical Compounders with Stable Growth Beneficiaries of Structural Beneficiary of Economic Consumption ideas, Brands changes in economy Cycles & High moat businesses The investment strategy of the scheme will be as per the Scheme Information Document 38 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
ICICI Prudential Multicap Fund Flexibility to invest Well diversified Mix of Value and Top down and Less sector skewness & across market across various Growth Strategy bottom up Midcap/Smallcap allocation capitalization sectors and stocks approach based directionally as per our In-House Market Cap Model The investment strategy of the scheme will be as per the Scheme Information Document 39 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Our SIP Recommendations ICICI Prudential ICICI Prudential ICICI ICICI Prudential ICICI Prudential Value Discovery Large & Midcap Prudential Smallcap Fund US Bluechip Equity Midcap Fund Fund Fund (An open ended equity Fund (An open ended equity scheme predominantly (An open ended equity (An open ended equity scheme predominantly investing in smallcap (An open ended equity scheme following a scheme investing in both investing in mid cap scheme investing value investment stocks) predominantly in strategy) largecap and midcap stocks) stocks) securities of large cap companies listed in the United States of America.) 40 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Equity Valuation Index 170 150 Book Partial Profits 130 115.35 Equity valuations show that the market valuations are in Incremental Money to Debt the zone where investors are 110 Neutral recommended to invest in 90 Asset Allocation / Balanced Advantage Funds & Credit Invest in Equities Risk/Medium Duration Funds 70 Aggressively invest in Equities 50 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Equity Valuation index is calculated by assigning equal weights to Price-to-Earnings (PE), Price-to-Book (PB), G-Sec*PE and Market Cap to GDP ratio. G-Sec – Government Securities. GDP – Gross Domestic Product; Asset Allocation – Schemes that 41 invest both in equity and fixed income The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
OUR FIXED INCOME OUTLOOK: PLAY ON LIQUIDITY & CARRY 42 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Macro Economic Situation – Broad Parameters Fiscal Year Ends FY13 FY14 FY15 FY16 FY17 FY18 FY19 Latest* Inflation (CPI%) 10.2 9.5 5.9 4.9 3.8 3.6 3.4 3 Current Account Deficit (% GDP) -4.8 -1.7 -1.3 -1.1 -0.6 -1.9 -2.4 -2.5 Fiscal Deficit (% GDP) 4.9 4.5 4.1 3.9 3.5 3.5 3.4 3.4 Crude Oil (USD/barrel) 109 107 53 39 60 57.8 64.5 GDP Growth (%) 5.6 6.6 7.2 7.9 7.9 7.3 6.8 64.23 Forex Reserves (USD bn) 292 304 342 356 370 424 413 5.8 Currency (USD/INR) 54.3 59.9 62.5 66.3 64.9 64.5 69.9 419 US 10YR G-sec Yields (%) 1.85 2.72 1.92 1.77 2.39 2.78 2.41 68.40 2.03 Source: CRISIL Research; FY refers to fiscal year ends Apr - Mar; *Inflation (CPI) is for the month of May-19, Currency, Crude Oil prices as on 05 July 2019 , Forex Reserves as on April-2019, US 10Yr G-sec(%) 43 as on 04 July 2019; CAD is Q3FY19 print; FD Estimates from Budget Documents for FY20; GDP is for Q4FY19. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Current Fixed Income Market Scenario RBI has delivered 75 bps rate cut in CY’19 Despite the rate cuts, the corporate bond rates & spreads continue to remain high Rate Transmission channel are broken due to credit concern, NBFC slowdown and crowding-out effect. Banks Marginal Cost of Lending Rates (MCLR) continue to remain elevated, which has further hampered the rate transmission process High small savings rate has been a deterrent for banks to reduce deposit rate even with 75 bps rate cuts. 44 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
RBI has cut rates by 75 bps in CY‟19 RBI has cut Repo rates and SLR (Statutory Liquidity Ratio) rates by 75 bps in CY 19. However, the transmission continues to remain challenging Repo Rate (%) 6.5 6.4 6.3 6.2 6.1 6.0 5.9 5.8 5.7 5.6 5.5 Source : Reserve Bank of India. Data as on 30-June-2019; The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors. Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 45
Transmission channels are broken – Corporate bond spread Corporate Bond spreads remain elevated due to crowding out effect and due to credit concerns. This has resulted into limited transmission of rates 10 9 8.42 8 7 7.83 6 5.75 5 Corporate Bond Yields (%) Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 AAA - 3 Year AA - 3 Year Repo Rate Source : CRISIL Research, Data as on 02-Jul-2019 46 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
What lies ahead? 47 Currency in circulation(CIC) before the festival season is expected to remain low Govt. surplus is expected to remain low post the increase in non-discretionary spending which is positive for system liquidity Additionally, RBI is expected to pass on dividend income to the GOI, which will add to core liquidity surplus Finally, RBI has been maintaining accommodative stance for liquidity and has proactively used various liquidity easing tools. We expect the stance to continue Core liquidity may further increase depending on Reserves committee recommendations and implementation The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Play on Liquidity – Liquidity System Liquidity turned positive Conditions have moved into the Daily Interbank Liquidity (in US$, Bn) surplus mode and we believe system 100 80 liquidity will 60 continue to 40 20 improve 0 -20 -40 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Source : RBI, Data as on June 8, 2019 48 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
Currency in Circulation (CIC )Trend Seasonal Trend 4.0% Currency in Circulation MoM% 5Y Avg 3.5% 3.0% Currency in circulation dips in Seasonally, the 2.5% sequential terms between Jun-Sept May-September 2.0% period is when the 1.5% CIC reduces due to 1.0% lower demand, this 0.5% is positive for the 0.0% -0.5% liquidity. -1.0% Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Nov 19 Dec 19 Jan 19 Feb 19 Mar 19 Source : RBI, Data year on year for the last 5 Year average 49 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
RBI Dividend to Government Surplus Transferable to the Government of India (INR '000cr) 80 73.0 71.4 RBI usually 70 65.3 transfers the surplus dividend to 60 54.5 39.5 the government in 50 August. This will further boost the 40 system liquidity 30 20 10 0 F2016 F2017 F2018* F2019** F2015 Source: RBI, Budget, Morgan Stanley Research *Includes Interim dividend of INR100bn in F2018. ** Includes interim dividend of INR 280bn in F2019. Note the years are as per GoI's fiscal year 50 accounting (Apr-Mar) The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.
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