Monthly Market Outlook May 2019 - Monthly Market Outlook June 2019 Equity & Fixed Income Outlook - ICICI Prudential Mutual Fund
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Monthly Market Outlook
June 2019
Monthly Market Outlook
May 2019
Equity & Fixed Income Outlook
Global Indices Performance
Returns Performance - May 2019
4 3.1 • Russian markets rose 3.1%
1.7 during the month owing to a
2 0.7
0 rise in crude prices (Russia’s
Returns (%)
key export). Indian markets
-2
cheered the re-election of the
-4 -2.5 incumbent government and
-3.5 -3.8
-6 -4.3 -5.0 rose by 1.7%
-5.8 -5.9
-8 -6.7 -6.8 -7.3 -7.4
-10 -8.3 • Mostly, markets ended in
-9.4 negative terrain owing to
-12
global growth slowdown &
South Korea
Brazil
Switzerland
Germany
China
Europe
India
UK
US
Japan
Singapore
Hong Kong
Russia
Taiwan
Indonesia
France
escalating US-China Trade
issues
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 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; Returns are
absolute returns for the PRI variant of the index calculated between April 30, 2019 – May 31, 2019. Past performance may or may not be sustained in future 2
Sectoral Indices Performance - India
Returns Performance - May 2019
12 10.6 9.6 • Capital Goods &
8 6.2 5.8 Financials outperformed
Returns (%)
4.8 4.1 3.5 in May given the
4 2.5 2.1
0.3 improved policy
0 environment post election
-4 -1.3 -1.6 -2.1 results
-2.9
-8 -6.6 -7.4 • Sectors like IT and Auto
-12 were impacted by trade
Bankex
Power
Telecom
Infra
HC
Energy
Basic Materials
Realty
FMCG
CG
Oil & Gas
Auto
IT
CD
Metal
Finance
tensions and weak sales
data due to slowing
consumption respectively
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 India Infrastructure; IT - S&P
BSE Information Technology, NBFC – Non-banking Finance Companies. Data Source: MFI; Returns are absolute returns for the TRI variant of the index calculated between April 30, 2019 – May 31, 2019; Past performance may or may not be sustained in future
3
OUR EQUITY OUTLOOK:
REFORMS CONTINUITY TO SHAPE INDIA‟S LONG
TERM GROWTH STORY
4General Elections Outcome 2019
The incumbent government won the general elections with a significant majority
owing to various reforms executed in the past and potential continuity of the same in future
GROWTH IN VOTE SHARE OF LOK SABHA REPRESENTATION
THE INCUMBENT GOVERNMENT OVER YEARS
No. of Seats won by the Incumbent Government What does the Lok Sabha look like
400
305 303 353
350 336
300 300 262
No. of Seats
295 250 218
290 200 181
159
285 150
282 91
100 60
280
50
275
0
270 2019 2014 2009 2004
2014 2019 Incumbent Government & Allies Opposition & Allies
Source: Election Commission of India
5Key Reforms Implemented over the last 5 Years
GST has resulted in a simpler indirect taxation framework with the removal of
GST Implementation multiple tax slabs across different states. This would further result in higher tax-to-
GDP ratio and reduce India‟s consolidated Fiscal Deficit
The „Jan Dhan Yojna‟ was started in 2014 under which ~350 Mn bank
Financial Inclusion accounts* have been opened primarily being used for savings & payments.
These accounts can be used for DBT-related cash transfers
This law helped boost home buyer confidence and made it difficult
RERA Implementation for unscrupulous property developers to survive
India did not have a bankruptcy law until 2017. The passing of the
Bankruptcy Law law and the action thereafter has reduced the resolution time for
the bankruptcy related cases from 5+ years earlier to 18-24 months.
5 associate banks of State of Bank of India were merged
into SBI. Also, Vijaya Bank and Dena Bank were merged
PSU Bank Consolidation into Bank of Baroda, reducing the number of state owned
banks from 26 to 19
*Source: CLSA. GST – Goods & Services Tax, GDP – Gross Domestic Product, RERA – Real Estate Regulation Act/Authority, PSU – Public Sector Unit
6Current Scenario
01 The Incumbent Government has been re-elected
with a significant majority
02
Continuity of Reforms & Initiatives are expected
from the Incumbent Government which is a big
positive for the markets in the long term
The current environment however, poses some major
challenges to the newly-elected government including a
03 slowdown in economy, Fiscal Concerns, NBFC Concerns,
revitalizing PSU Banks, etc. However, the continuity in
reforms should help in navigating these concerns
04
We have been neutral on equities. However, the
outlook has turned more positive on the
expectations of continued reforms by a stable
government
NBFC – Non Banking Financial Company
7Analysis of market returns post election results
Whenever the election outcome is favourable, there tends to be a short term spurt in market returns. However, over long term,
markets seek direction from macro-economic indicators which highlight the overall health of the economy.
2009 - 2014 S&P BSE Sensex Index Performance 2014 - 2019 S&P BSE Sensex Index Performance
26,000
24,000 42,000
1Y 4Y Returns
22,000
Returns 9.5% 37,000 1Y
15.9% Returns 4Y Returns
20,000
14.9% 8.8%
18,000 32,000
16,000
27,000
14,000
12,000 22,000
May-09
May-10
May-11
May-12
May-13
May-14
May-14
May-15
May-16
May-17
May-18
May-19
Source: BSE India, Past performance may or may not be sustained in future.
8Current Valuations Fully Priced-In
A look at various economic indicators highlight the fact that valuations are not as reasonable as they were in 2014.
Also, there are signs of slowdown in the economy.
Valuations April 2014 April 2019
Trailing P/E Nifty 50 18.79 29.33
Trailing P/B Nifty 50 3.23 3.76
Trailing P/E Nifty Midcap 100 15.56 33.71
Trailing P/B Nifty Midcap 100 1.65 2.85
Trailing P/E Nifty Smallcap 100 19.28 33.48
Trailing P/B Nifty Smallcap 100 0.90 2.06
66%
Market Cap to GDP Ratio (April 30, 2019) 82.2%
(as on 31st Mar 2014)
All data is as of April 30, 2019. Source: NSE, BSE India, Reserve Bank of India, Edelweiss Securities, Kotak Securities, Axis Direct; P/E: Price to Earnings Ratio; P/B: Price to Book Ratio.
9Growth numbers slowing down
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
9.0%
7.7% 8.0%
8.0% 6.6%
7.0% 7.0%
7.0%
5.8%
GDP (%)
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19
Source: CRISIL Research; Data as of March 31, 2019; GDP – Gross Domestic Product
10High Frequency Indicators – Activity Index Growth
The overall economic activity witnessed a slowdown to its lowest level since 2013
Activity Index Growth
12 25
Index of Activity Growth (%)
10 20
GDP Growth (%)
15
8
10
6
5
4
0
2 -5
0 -10
Oct-08
Apr-10
Oct-11
Apr-13
Oct-14
Apr-16
Oct-17
Apr-19
GDP growth (%) Index of activity Growth (%) - 3m m.a. (rhs)
Source: Jefferies Research.
11High Frequency Indicators – Private Consumption
Private Consumption showing a downtrend in growth
Auto Sales (YoY Growth)
50%
40% 37.5%
30%
YoY Growth
20% 17.2%
10% 22.3%
1.6%
0%
-10% -17.1%
-20% -16.4%
-30%
Oct-18
Aug-18
Nov-18
Sep-18
Dec-18
Jan-19
Mar-19
Apr-18
Feb-19
May-18
Jun-18
Apr-19
Jul-18
Domestic 2 Wheeler Sales (YoY Growth) Domestic Passenger Vehicle Sales (YoY Growth)
Source: Morgan Stanley Research.
12High Frequency Indicators – Air Traffic
Number of Air Passengers Flying have been declining Year-On-Year
Air Traffic
25%
21.7%
20%
YoY Growth
15.6%
15%
10%
5%
-1.1%
0%
Jun-18
Nov-18
Jan-19
Mar-19
Oct-18
Dec-18
Apr-18
May-18
Aug-18
Sep-18
Feb-19
Jul-18
-5%
Source: Morgan Stanley Research.
13FPI Flows Trend – Month on Month
FPI flows could get volatile going ahead depending on Global Growth concerns and
Global Central Bank Policies
40,000 33,981
Net FPI Flows (In INR Crs.)
30,000
21,193
20,000 17,220
10,000 7,920
0
May-16
Nov-16
May-17
May-18
May-19
Nov-17
Nov-18
-10,000
-20,000
-30,000
-28,921
-40,000
Source: NSDL; Data as of May 31, 2019. FPI – Foreign Portfolio Investors
14Valuations –
Divergence between Growth and Value Stocks
P/E ratio of MSCI India growth and MSCI India value
indices, 2010-19 (%)
35 33.1
Value and special
30 situation themes
expected to play out
25 22.7 due to significant
disconnect between
20 price and value in
many „Growth‟ and
15
„Value‟ stocks
10
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Sep-16
Mar-17
Dec-16
Sep-17
Dec-17
Mar-18
Sep-18
Dec-18
Mar-19
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
MSCI Growth Index MSCI Value Index
Source: Morgan Stanley; Data as of March 31, 2019
15Case for Long Term Investing &
Managing Volatility
Implementation of reforms measures and
Stability and past track record of Reforms the subsequent results to take ~3-5 years.
Continuity of the incumbent Government to Hence, a minimum investment horizon of 3-5
ensure long term growth story remains intact years is recommended
However, short term volatility to prevail given
We also believe staggered investments over long
the current economic scenario. Hence we
term in the form of SIP in Equity Schemes may
recommend Asset Allocation Schemes to
help in wealth creation
benefit from volatility
16Outlook – Asset Allocation, Value &
Special Situations Theme
Neutral stance on equities as valuations look
completely priced in. However the outlook has
improved.
Volatility may prevail due to global and domestic
factors
Recommend lump sum investment in Asset
Allocation Schemes to benefit out of volatility
Equity accumulation, in mid/small/multicaps,
should be in a staggered manner via SIP/STP
Value and special situation themes expected to
play out during 2019
17Schemes to manage Volatility:
Our Asset Allocation Bouquet
These schemes aim to benefit from volatility and manage equity exposure based on valuations
ICICI Prudential ICICI Prudential ICICI Prudential Balanced ICICI Prudential ICICI Prudential ICICI Prudential
Regular Savings Fund* Equity Savings Fund Advantage Fund Multi-Asset Fund Equity & Debt Fund Asset Allocator Fund^
Dynamic Asset
Equity Allocation or Multi Fund of
Conservative Aggressive
Savings Balanced Asset Funds
Hybrid Fund Hybrid
Fund Advantage Allocation
Fund
Net Equity– Net Equity– Net equity – Net Equity – Net Equity– Net Equity Level*:
10-25% 15-50% 30-80% 10-80% 65-80% 0-100%
The asset allocation and investment strategy will be as per the Scheme Information Document, *This scheme will attract debt taxation. ^Investors may please note that they will be bearing the
recurring expenses of this Scheme in addition to the expenses of the underlying Schemes in which this Scheme makes investment.
18ICICI Prudential Balanced Advantage Fund*
S&P BSE Sensex Levels vis-a-vis ICICI Prudential BAF Net Equity Exposure (%)
40000 Net Equity 39,032 80
Net Equity
77.65
77.4 75
ICICI Prudential Balanced Advantage
35,965
35000 70
Fund Net Equity Exposure (%)
65
Sensex Levels
30000 29,183 60
55
25000 50
45
23002
20000 40
18,620 Net Equity Net Equity
31.6 42.0 35
15000 34.3 30
Jan'11
Jan'16
Nov'11
Mar'10
Jul'13
Mar'15
Nov'16
Jul'18
May'14
May'19
Sep'12
Sep'17
Sensex Level Net Equity Exposure %
Source: BSE India & MFIE, Data as of May 31, 2019. The in-house valuation model starts from March 2010 onwards. ICICI Prudential BAF stands for ICICI Prudential Balanced Advantage Fund.
* An open ended dynamic asset allocation fund. The investment strategy will be as per Scheme Information Document
19ICICI 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:
•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
20Schemes to benefit from Value & Special
Situations Theme
These schemes aim to create wealth over long term by investing in opportunities at
reasonable valuations
ICICI Prudential Value Discovery Fund^
01 Value Fund with Equity Levels –
65 - 100%
Fund of
Funds
ICICI Prudential India Opportunities Fund*
Special Situations Fund with Equity & Equity related
instruments of special situations theme of around
80 - 100%.
02
*An open ended equity scheme following special situations theme. ^An open ended equity scheme following a value investment strategy. The investment strategy of the schemes will be as per the Scheme
Information Document 21ICICI 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
22Schemes to benefit from growth story
These schemes aim to benefit from the long term growth story
GROWTH
ICICI Prudential
Multicap Fund#
ICICI Prudential
Midcap Fund^ Multicap Fund
Equity Levels –
ICICI Prudential 65 - 100%
Smallcap Fund* Midcap Fund
Equity Levels–
Smallcap Fund 65 - 100%
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 investment strategy of the schemes will be as per the Scheme Information Document
23ICICI 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 24ICICI Prudential Multicap Fund
Flexibility to invest across market capitalization
Well diversified across various sectors and stocks
Mix of Value and Growth Strategy
• Top down and bottom up approach
• Less sector skewness and Midcap/ Smallcap allocation would be based
directionally as per our In-House Market Cap Model
The investment strategy of the scheme will be as per the Scheme Information Document
25Our SIP Recommendations
ICICI Prudential ICICI Prudential ICICI ICICI Prudential ICICI Prudential
Value Discovery Large & Midcap Prudential Smallcap Fund US Bluechip Equity
Fund Fund Midcap Fund Fund
(An open ended equity (An open ended equity (An open ended equity (An open ended equity (An open ended equity
scheme following a scheme investing in both scheme predominantly scheme predominantly scheme investing
value investment largecap and midcap investing in mid cap investing in smallcap predominantly in
strategy) stocks) stocks) stocks) securities of large cap
companies listed in
the United States of
America.)
26Equity Valuation Index
170
150
Book Partial Profits
130 117.73 Equity valuations show that
Incremental Money to Debt the market valuations are in
110 the zone where investors are
Neutral recommended to invest in
Asset Allocation / Balanced
90 Advantage Funds & Credit
Invest in Equities
Risk/Medium Duration Funds
70
Aggressively invest in Equities
50
May-06
May-07
May-08
May-09
May-10
May-11
May-12
May-13
May-15
May-16
May-17
May-18
May-19
May-14
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
invest both in equity and fixed income
27OUR FIXED INCOME OUTLOOK:
PLAY ON LIQUIDITY & CARRY
28Current Scenario
01
RBI has delivered a 50 bps rate cut. However due
to tight liquidity conditions, transmission remains
a challenge. Going forward, RBI is expected to
take various measures to improve liquidity
02
Liquidity is also expected to improve due to
government expected to do non-discretionary
spending post budget.
03 June – September period is seasonally less
stressful for system liquidity
We expect liquidity to improve, which in turn can
be positive for the short end of the yield curve 04
Source : RBI, Data as on 31-May-2019 29Play on Liquidity –
System Liquidity likely to turn positive
100 Daily Interbank Liquidity(in US$, Bn)
80
60
Liquidity
40 Conditions
remained in the
20
deficit mode.
0 However, we
-20 believe system
liquidity is likely to
-40 turn positive
-60
Dec-13
Dec-15
Dec-17
Aug-12
Apr-13
Aug-14
Apr-15
Aug-16
Apr-17
Aug-18
Apr-19
Source : RBI, Data as on 30-April-2019 30Government Surplus expected to come down
Government of India Surplus Cash Surplus with RBI (INR Bn)
1100 Govt. has been
maintaining high cash
balance with RBI. Since
800
the election is behind us,
we expect govt. to push
500 the surplus into the
system through non-
discretionary spending,
200 which may result in
positive liquidity.
-100
Dec-18
Apr-18
Jun-18
Aug-18
Oct-18
Apr-19
Feb-19
Source : RBI, Data as on 30-April-2019 31Currency in Circulation (CIC )Trend Seasonal Trend
4.0% Currency in Circulation MoM% 5Y Avg
3.5%
3.0%
Currency in circulation dips in
2.5% sequential terms between Jun-Sept Seasonally, the
May-September
2.0%
period is when the
1.5% CIC reduces due to
1.0% lower demand, this
is positive for the
0.5% liquidity.
0.0%
-0.5%
-1.0%
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Source : RBI, Data as on 31-Mar-2019 32RBI Dividend to Government
Surplus Transferable to the Government of India (US$ bn)
12
10.8 10.5
10.1
10
8.7 RBI usually
8 transfers the
6.1
surplus dividend to
6 the government in
August. This will
4 further boost the
system liquidity
2
0
F2015 F2016 F2017 F2018* F2019**
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
accounting (Apr-Mar)
33Going Forward - RBI Expected to Ease Liquidity
RBI Tools
OMO Foreign
Cash Reserve Accommodative Dividend/
Purchases Exchange
Ratio Stance Reserve
SWAP
34RBI using OMOs & FX SWAP to Manage Liquidity
OMO Operations (In INR Bn)
600 FX SWAP‟s
500 500
400 RBI is
300 250 implementing
measures like
200 200
100 OMOs & Foreign
100
Exchange Swap to
0 manage liquidity
-100
-200
-300
Dec-16
Dec-17
Dec-18
Aug-16
Oct-16
Apr-17
Jun-17
Aug-17
Oct-17
Apr-18
Aug-18
Oct-18
Apr-19
Jun-18
Feb-17
Feb-18
Feb-19
Source : RBI, Data as on 30-April-2019 35Improvement in Liquidity Conditions & Short End Space
2009 Phase 2017 Phase
-6,00,000 14
-5,00,000 13
Surplus Zone Liquidity conditions
-4,00,000 12
-3,00,000
is expected to
11 improve as
-2,00,000
10 discussed in the
-1,00,000 previous slides.
9
- This shift is positive
1,00,000
8 for the short term
7 rates
2,00,000
3,00,000 Deficit Zone 6
4,00,000 5
Liquidity (In Crs.) 1 Year AAA Yield (%) 10 Year AAA Yield (%)
Source : RBI, Data as on 24-May-2019 36Play on Carry –
Strong case for investment in Credit Risk Funds
Valuations are attractive
Industry Flows are slowing Sentiments are Negative
down
37Valuations are Attractive –
ICICI Prudential Credit Risk Fund – Spread Over Repo
Phase 1 Phase 2
6
5 Current Spread :
4.5
4
3
Average Spread :
2 2.9
1
0
Nov-16
Nov-17
Nov-18
Jun-11
Jun-15
Jun-16
Mar-11
Sep-11
Mar-12
Jun-12
Sep-12
Mar-13
Jun-13
Sep-13
Mar-14
Jun-14
Sep-14
Mar-15
Sep-15
Mar-16
Feb-17
Feb-18
Feb-19
Dec-10
Aug-17
Aug-18
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Aug-16
May-17
May-18
May-19
Data as on 31-May-2019, YTM values taken since scheme inception. Source: MFI Explorer, Past performance may or may not be sustained in the future
38ICICI Prudential Medium Term Bond Fund–
Spread Over Repo (Last 10 Year Trend)
Phase 1 Phase 2
5
4 Current Spread :
4.0
3
Average : 2.13
2
1
0
-1
-2
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
May-09
May-10
May-11
May-12
May-13
May-14
May-15
May-16
May-17
May-18
May-19
Data as on 31-May-2019, YTM values taken for the last 10 years. Source: MFI Explorer, Past performance may or may not be sustained in the future
39Invest when Flows are Muted
Credit Risk Funds Category AUM (In Crs) - Industry Level
92,000 90,924
90,000
88,000
86,000
84,000 81,181
82,000
79,911
80,000
78,000
76,000
74,000
Mar-18
Apr-18
May-18
Jun-18
Aug-18
Oct-18
Mar-19
Jul-18
Apr-19
Nov-18
Dec-18
Sep-18
Jan-19
Feb-19
Source: MFIE. The funds considered are only Credit Risk Funds as per SEBI classification. Data as of April 30, 2019
40Why ICICI Prudential Accrual Funds
Robust Strong Credit Better Risk
Investment
Investment Selection Adjusted
Philosophy
Process Process Returns
41Investment Philosophy
01 Safety
The investment team
seeks to achieve Safety,
Liquidity and Returns
(SLR) in order of priority
Liquidity 02 for managing variety of
our fixed income
schemes.
03 Returns
42Robust Investment Process
CREDIT RESEARCH PORTFOLIO CONSTRUCTION PORTFOLIO MONITORING
Involves assessment of : • Regular review of macro-
• Based on investment
economic variables, liquidity
• Past track record of the mandate of the scheme
and credit risk
company
• Yield and interest rate risk • Regular monitoring of
• Cash flows
management based on financial and business
• Asset Quality interest rate view and profile of issuers
technical factors
• Assessment of Management • Regular meetings with
risk & Business risk company managements
• Liquidity risk management
• Credit Ratings by external to avoid asset-liability • Performance and portfolio
credit rating agencies mismatch analysis
43Strong Credit Selection Process
Target list filters
• Independent research team Decision making is
• Self-origination model not concentrated to
• External credit rating one person
Focus not just on
credit and liquidity
Independent risk but also on
evaluation by Risk diversification
Team CREDIT
SELECTION
44Accrual Schemes
Scheme Name Yield to Maturity Modified Duration
ICICI Prudential Credit Risk Fund 10.54% 1.43 Years
ICICI Prudential Medium Term Bond Fund 9.96% 2.04 Years
ICICI Prudential Floating Interest Fund 8.77% 234.78 Days
These schemes aim to provide better risk-adjusted returns based on our investment process
Data as of May 31, 2019; Past performance may or may not be sustained in future
45High Quality Portfolio
Exposure to
Average Yield to Maturity Modified
Scheme Name AAA*
Maturity (YTM) Duration
securities
ICICI Prudential Money Market Fund 172.49 Days 7.20% 160.86 Days 100%
ICICI Prudential Savings Fund 388.11 Days 7.74% 297.65 Days 86.78%
ICICI Prudential Short Term Fund 2.47 Years 8.19% 1.86 Years 82.51%
ICICI Prudential Corporate Bond Fund 2.38 Years 7.89% 1.68 Years 99.99%
ICICI Prudential Banking & PSU Debt Fund 3.80 Years 8.07% 2.38 Years 80.57%
Data as of May 31, 2019; Past performance may or may not be sustained in future. *AAA, G-Sec and Cash
46Outlook – Play on Liquidity & Carry
We continue to remain sanguine towards the short end
of the yield curve and on spread assets
We may tactically alter duration based on the spread
opportunity available in different market segment
We believe the next rate cut would be data-dependent
Accrual schemes have moved into „buy‟ territory with
attractive valuations, reduced flows, and negative
sentiments (NBFC liquidity crunch).
Risk-reward benefit has turned favourable; good time to
earn carry with high credit spreads available in the
corporate bond space
NBFC – Non-Banking Financial Companies
47Debt Valuation Index
10
9 • We recommend investors to
Aggressively in High Duration
invest in Low Duration
8 schemes or accrual schemes
High Duration
7 such as ICICI Prudential
High Duration
Credit Risk Fund.
6
5 • For those investors who aim
Moderate Duration
4 to benefit from volatility we
2.44 recommend investment in
3 Low Duration 2.50 ICICI Prudential All Seasons
2 Bond Fund.
Ultra
Ultra Low
Low Duration
Duration
1
Sep-16
Jul-16
Jul-17
May-18
Jul-18
May-16
May-17
Sep-17
Sep-18
May-19
Jan-17
Jan-18
Jan-19
Nov-16
Mar-17
Nov-17
Mar-18
Nov-18
Mar-19
Debt Valuation Index considers WPI, CPI, Sensex YOY returns, Gold YOY returns and Real estate YOY returns over G-Sec yield, Current Account Balance and Crude Oil Movement for calculation. WPI – Wholesale Price Index;
CPI – Consumer Price Index. None of the aforesaid recommendations are based on any assumptions. These are purely for reference and the investors are requested to consult their financial advisors before investing.
48Fixed Income Recommendations
ICICI Prudential Floating Interest Fund
Cash Management Solution
(aims to benefit from better risk adjusted returns)
ICICI Prudential Ultra Short Term Fund
ICICI Prudential Medium Term Bond Fund
Accrual Schemes
(aims to benefit from capturing yields at elevated levels)
ICICI Prudential Credit Risk Fund
Dynamic Duration Schemes
ICICI Prudential All Seasons Bond Fund
( aims to benefit from volatility by actively managing duration)
Low/Short Duration Schemes
ICICI Prudential Short Term Fund
(aims to benefit from mitigating interest rate volatility)
49Our Equity Schemes
Scheme Name Type of Scheme
ICICI Prudential Bluechip Fund An open ended equity scheme predominantly investing in large cap stocks
ICICI Prudential Large & Mid Cap Fund An open ended equity scheme investing in both large cap and mid cap stocks.
ICICI Prudential Midcap Fund An open ended equity scheme predominantly investing in mid cap stocks.
ICICI Prudential Smallcap Fund An open ended equity scheme predominantly investing in small cap stocks.
ICICI Prudential Value Discovery Fund An open ended equity scheme following a value investment strategy.
An open ended equity scheme investing across large cap, mid cap, small cap
ICICI Prudential Multicap Fund
stocks.
ICICI Prudential India Opportunities Fund An Open Ended Equity Scheme following Special Situation theme
An open ended equity scheme investing predominantly in securities of large cap
ICICI Prudential US Bluechip Equity Fund
companies listed in the United States of America.
50Our Hybrid Schemes / Fund of Funds Scheme
Scheme Name Type of Scheme
ICICI Prudential Balanced Advantage Fund An open ended dynamic asset allocation fund
ICICI Prudential Regular Savings Fund An open ended hybrid scheme investing predominantly in debt instruments
An open ended scheme investing in equity, arbitrage and
ICICI Prudential Equity Savings Fund
debt.
An open ended hybrid scheme investing predominantly in equity and equity
ICICI Prudential Equity & Debt Fund
related instruments
An open ended scheme investing in Equity, Debt, Gold/Gold ETF/units of REITs &
ICICI Prudential Multi-Asset Fund
InvITs and other asset classes as may be permitted from time to time.
Scheme Name Type of Scheme
An open ended fund of funds scheme investing in equity oriented schemes, debt
ICICI Prudential Asset Allocator Fund
oriented schemes and gold ETFs/schemes.
51Our Debt Schemes
Scheme Name Type of Scheme
An open ended ultra-short term debt scheme investing in instruments such that the Macaulay
ICICI Prudential Ultra Short Term Fund
duration of the portfolio is between 3 months and 6 months.
An open ended short term debt scheme investing in instruments such that the Macaulay
ICICI Prudential Short Term Fund
duration of the portfolio is between 1 Year and 3 Years.
An open ended medium term debt scheme investing in instruments such that the Macaulay
ICICI Prudential Medium Term Bond Fund duration of the portfolio is between 3 Years and 4 Years. The Macaulay duration of the portfolio
is 1 Year to 4 years under anticipated adverse situation.
ICICI Prudential Credit Risk Fund An open ended debt scheme predominantly investing in AA and below rated corporate bonds.
An open ended debt scheme predominantly investing in floating rate instruments (including
ICICI Prudential Floating Interest Fund
fixed rate instruments converted to floating rate exposures using swaps/derivatives).
ICICI Prudential All Seasons Bond Fund An open ended dynamic debt scheme investing across duration.
ICICI Prudential Savings Fund An open ended debt scheme with Macaulay Duration between 6 - 12 months
An open ended debt scheme predominantly investing in Debt instruments of banks, Public
ICICI Prudential Banking & PSU Debt Fund
Sector Undertakings, Public Financial Institutions
ICICI Prudential Corporate Bond Fund An open ended debt scheme predominantly investing in AA+ or above rated securities.
ICICI Prudential Money Market Fund An open ended debt scheme investing in money market instruments
Macaulay Duration - The Macaulay duration is the weighted average term to maturity of the cash flows from a bond. The weight of each cash flow is determined by dividing the present value of the cash flow by the price.
52Riskometers
ICICI Prudential Multi-Asset Fund is suitable for investors who are seeking*:
Long term wealth creation
An open ended scheme investing across asset classes.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
ICICI Prudential Equity & Debt Fund is suitable for investors who are seeking*:
Long term wealth creation solution
A balanced fund aiming for long term capital appreciation and current income by investing in equity as well as fixed income securities.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
ICICI Prudential Balanced Advantage Fund is suitable for investors who are seeking*:
Long term wealth creation solution
An equity fund that aims for growth by investing in equity and derivatives.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
53Riskometers
ICICI Prudential Bluechip Fund is suitable for investors who are seeking*:
Long term wealth creation
An open ended equity scheme predominantly investing in large cap stocks.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
ICICI Prudential Value Discovery Fund is suitable for investors who are seeking*:
Long term wealth creation
An open ended equity scheme following a value investment strategy
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
ICICI Prudential Large & Mid Cap Fund is suitable for investors who are seeking*:
Long term wealth creation
An open ended equity scheme investing in both largecap and mid cap stocks
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
54Riskometers
ICICI Prudential Regular Savings Fund is suitable for investors who are seeking*:
Medium to long term regular income solution
A hybrid fund that aims to generate regular income through investments primarily in debt and money market instruments and long term
capital appreciation by investing a portion in equity.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
ICICI Prudential Credit Risk Fund is suitable for investors who are seeking*:
Medium term savings
A debt scheme that aims to generate income through investing predominantly in AA and below rated corporate bonds while
maintaining the optimum balance of yield, safety and liquidity
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
ICICI Prudential Medium Term Bond Fund is suitable for investors who are seeking*:
Medium term savings
A debt scheme that invests in debt and money market instruments with a view to maximize income while maintaining optimum balance
of yield, safety and liquidity
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
55Riskometers
ICICI Prudential Smallcap Fund is suitable for investors who are seeking*:
Long Term wealth creation
An open ended equity scheme that seeks to generate capital appreciation by predominantly investing in equity and equity related
securities of small cap companies.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
ICICI Prudential Short Term Fund is suitable for investors who are seeking*:
Short term income generation and capital appreciation solution
A debt fund that aims to generate income by investing in a range of debt and money market instruments of various maturities.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
ICICI Prudential All Seasons Bond Fund is suitable for investors who are seeking*:
All duration savings
A debt scheme that invests in debt and money market instruments with a view to maximize income while maintaining optimum balance
of yield, safety and liquidity
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
56Riskometers
ICICI Prudential Floating Interest Fund is suitable for investors who are seeking*:
Short term savings
An open ended debt scheme predominantly investing in floating rate instruments
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
ICICI Prudential Ultra Short Term Fund is suitable for investors who are seeking*:
Short term regular income
An open ended ultra-short term debt scheme investing in a range of debt and money market instruments
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
ICICI Prudential Midcap Fund is suitable for investors who are seeking*:
Long Term wealth creation
An open-ended equity scheme that aims for capital appreciation by investing in diversified mid cap companies.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
57Riskometers
ICICI Prudential India Opportunities Fund (The scheme is suitable for investors who are seeking*)
Long term wealth creation
An equity scheme that invests in stocks based on special situations theme.
*Investors should consult their financial advisors if in doubt about whether the product is suitable for them.
ICICI Prudential Equity Savings Fund is suitable for investors who are seeking*:
Long term wealth creation
An open ended scheme that seeks to generate regular income through investments in fixed income securities, arbitrage and other
derivative strategies and aim for long term capital appreciation by investing in equity and equity related instruments.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
ICICI Prudential Multicap Fund is suitable for investors who are seeking*:
Long term wealth creation
An open ended equity scheme investing across largecap, mid cap and small cap stocks.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
58Riskometers
ICICI Prudential US Bluechip Equity Fund is suitable for investors who are seeking*:
Long term wealth creation
An open ended equity scheme primarily investing in equity and equity related securities of companies listed on recognized stock
exchanges in the United States of America
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
ICICI Prudential Savings Fund is suitable for investors who are seeking*:
Short term savings
An open ended low duration debt scheme that aims to maximize income by investing in debt and money market instruments while
maintaining optimum balance of yield, safety and liquidity
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential Banking & PSU Debt Fund is suitable for investors who are seeking*:
Short term savings
An open ended debt scheme predominantly investing in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions
and Municipal Bonds
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
59Riskometers
ICICI Prudential Corporate Bond Fund is suitable for investors who are seeking*:
Short term savings
An open ended debt scheme predominantly investing in highest rated corporate bonds
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential Money Market Fund is suitable for investors who are seeking*:
Short term savings
A money market scheme that seeks to provide reasonable returns, commensurate with low risk while providing a high level of liquidity
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential Asset Allocator Fund (An open ended fund of funds scheme investing in equity oriented schemes, debt
oriented schemes and gold ETFs/ schemes) is suitable for investors who are seeking*:
• Long Term wealth creation
• An open ended fund of funds scheme investing in equity oriented schemes, debt oriented schemes and gold ETF/schemes.
*Investors should consult their financial advisors if in doubt about whether the product is suitable for them.
60Disclaimer For Mutual Funds
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
All figures and other data given in this document are dated. The same may or may not be relevant at a future date. The AMC takes no responsibility of updating any data/information in this material
from time to time. The information shall not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
prior written consent of ICICI Prudential Asset Management Company Limited. Prospective investors are advised to consult their own legal, tax and financial advisors to determine possible tax,
legal and other financial implication or consequence of subscribing to the units of ICICI Prudential Mutual Fund. Past Performance may or may not be sustained in future.
Disclaimer: In the preparation of the material contained in this document, ICICI Prudential Asset Management Company Ltd. (the AMC) has used information that is publicly available, including
Budget speech and information developed in-house. The stock(s)/sector(s) mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have
any future position in this stock(s). Some of the material used in the document may have been obtained from members/persons other than the AMC and/or its affiliates and which may have
been made available to the AMC and/or to its affiliates. Information gathered and material used in this document is believed to be from reliable sources. The AMC however does not warrant the
accuracy, reasonableness and / or completeness of any information. We have included statements / opinions / recommendations in this document, which contain words, or phrases such as
“will”, “expect”, “should”, “believe” and similar expressions or variations of such expressions, that are “forward looking statements”. Actual results may differ materially from those suggested by
the forward looking statements due to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic and political conditions
in India and other countries globally, which have an impact on our services and / or investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in
interest rates, foreign exchange rates, equity prices or other rates or prices etc. ICICI Prudential Asset Management Company Limited (including its affiliates), the Mutual Fund, The Trust and any
of its officers, directors, personnel and employees, shall not liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as
also any loss of profit in any way arising from the use of this material in any manner. Further, the information contained herein should not be construed as forecast or promise or investment
advice. The recipient alone shall be fully responsible/are liable for any decision taken on this material.
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