Interbank call money rates remained mostly below the RBI‟s repo rate of 4% in May owing to comfortable liquidity in the system. However, some pressure was seen on the rates following intermittent spike in demand for funds from banks. Currency in circulation rose 18.4% on-year in the week ended May 22, 2020, compared with 14.2% growth a year ago. The RBI, via its liquidity window, absorbed Rs 5114.71 billion on a net daily average basis in May 2020, compared with net liquidity absorption of Rs 4751.55 billion in April 2020. Bank credit growth rose 6.5% on-year in the fortnight ended May 8, 2020, compared with 7.2% on-year growth reported in the fortnight ended April 10, 2020.

1. June 2020
Interbank call money rates remained mostly below the RBI‟s repo rate of 4% in
May owing to comfortable liquidity in the system. However, some pressure was
seen on the rates following intermittent spike in demand for funds from banks.
Currency in circulation rose 18.4% on-year in the week ended May 22, 2020,
compared with 14.2% growth a year ago. The RBI, via its liquidity window,
absorbed Rs 5114.71 billion on a net daily average basis in May 2020, compared
with net liquidity absorption of Rs 4751.55 billion in April 2020.
Bank credit growth rose 6.5% on-year in the fortnight ended May 8, 2020,
compared with 7.2% on-year growth reported in the fortnight ended April 10,
2020.
Source: CRISIL, data as on May 31, 2020
Macro Update
Macro Economy Data Release
Indicator Latest Update Previous Update
IIP -16.7% (March) 4.62% (February)
GDP 3.1% (4QFY20) 4.1% (3QFY20)
USD/INR 75.61 (May) 75.12 (April)
WPI 1.00% (March) 2.26% (February)
CPI 5.84% (March) 6.58% (February)
Credit Spread Data in basis points
Tenure AAA AA A
1Y 1.09% 1.57% 2.13%
3Y 0.66% 1.21% 2.10%
5Y 0.21% 0.84% 1.86%
10Y 0.68% 1.43% 2.48%
Average Liquidity Support by RBI
Rs -5114.71 billion (Includes: LAF, MSF, SLF & Term Repo)**
Bank Credit Growth Bank Deposit Growth
6.5% 10.6%
Money Market
Tenure CD Change* CP Change*
1M 3.30 -90 4.35 -90
3M 3.35 -105 4.45 -155
6M 3.85 -125 5.30 -110
12M 4.35 -95 5.90 -90
Bond Market
Tenure G-Sec Change* AAA CB Change*
1Y 3.63 -30 4.50 -140
3Y 4.58 -13 5.30 -78
5Y 5.42 25 5.70 -70
10Y 6.01 -11 6.78 -44
* Change in basis points (bps) Data Source – RBI, Mospi.Nic.in, CRISIL Fixed Income Database, LAF –
Liquidity Adjustment Facility, MSF – Marginal Standing Facility, SLF – Standing Liquidity Facility, CP -
Commercial Paper, CD – Certificateof Deposit, CB – Corporate Bond, IIP – India Industrial Production, CPI
– Consumer Price Index, WPI – Wholesale Price Index, CAD – Current Account Deficit, GDP – Gross
Domestic Product
Crude: London Brent crude oil prices rose 40% in May to close at $35.33 per barrel
on 29th day of the month vis-à-vis $25.27 per barrel on April 30, 2020 on the
International Petroleum Exchange (IPE). Oil prices remained mostly positive in the
month mainly due to beginning of the production cuts by the major oil producers.
Hopes that re-opening of business activities would revive oil demand also aided
the prices rally.
Inflation: Retail inflation, based on Consumer Price Index (CPI) for April 2020, was
not released by the government due to limited transactions of products amidst
lockdown restrictions to prevent the spread of the covid-19 pandemic. CPI for
March 2020 was, however, revised to 5.84% in March 2020, compared with
2.86% in March 2019.
Currency: The rupee weakened against the dollar in May, with the exchange rate
settling at Rs 75.61 per dollar on May 29 as against Rs 75.12 per dollar on April
30.
Gilts: Gilts advanced in the month with the yield on the 10-year benchmark 6.45%
2029 paper settling at 6.01% on May 29, 2020, compared with 6.11% on April 30,
2020.
Source: CRISIL, data as on May 31, 2020
Data Source – RBI, Mospi.Nic.in, CRISIL Fixed Income Database, LAF – Liquidity Adjustment Facility, MSF –
Marginal Standing Facility, SLF – Standing Liquidity Facility, CP - Commercial Paper, CD – Certificate of
Deposit, CB – Corporate Bond, IIP – India Industrial Production, CPI – Consumer Price Index, WPI – Wholesale
Price Index, CAD – Current Account Deficit, GDP – Gross Domestic Product
FIXED INCOME UPDATE
Fixed Income Update

2. RBI delivered on rate cuts with the Repo rate at record low levels of 4% and Reverse Repo rate at 3.35%. The short end of the curve rates collapsed
with T-bills and even CD yields trading on par with reverse repo rates given excess the system liquidity. The 10 year Government bond ended the
month at 6.01bps, 10 bps lower than a month ago.
The long end of the yield curve was elevated due to government bond supply worries; however, we are seeing that the flattening of the curve has
begun with the comfort of RBI liquidity and yield support, given the attractive spreads at the longer end. Liquidity may rise sharply on government
spending and RBI liquidity infusion and this may prompt the markets to play for any carry available at any segment of the curve. The flattening is seen
as continuing given that the economy will take a while to recover from lockdowns.
Also, we think RBI is still left with lot of ammunition which should help in improving transmission of rates, some measures which we believe can
have major impact are:
1. Measures to prevent banks from deploying large amount of surplus liquidity at RBI‟s reverse repo window.
2. Increase in HTM (Hold to Maturity) limit of bonds for banks
3. RBI may be buying large quantity of govt. bonds either through Open Market Operation (OMO) purchases or in the primary market to help improve
demand-supply.
4. Ultra Long Term Repo Operations of 5 Years & above.
Based on the above assessment, we clearly believe the case for duration remains intact as we expect more strong measures from RBI in the coming
quarters. We have been maintaining a higher duration across our portfolios. Finally, we would like to highlight that we have seen improvement in the
financial markets, due to various measures undertaken by Govt. and RBI. These measures resulted in the cooling down of corporate bonds, but we
still believe there is lot of space for the spread assets (AA Corporate Bonds) to compress. Hence, we recommend investing in schemes with good
exposure towards spread assets (AA Corporate Bonds).
We have seen massive change in the economic and financial conditions in India due to the health crisis. We have seen RBI using its bazooka of
measures and adopting „whatever it takes stance‟ , however the yield curve remains the steepest in history. We have seen ample liquidity flushed
into the system but still the risk capital remains low. We are about to see one of the worst growth in decades but interest rates still remains higher
than lows of other crisis. We are witnessing 1 month CD collapsing to 3.30 levels but some of the good quality AA rated corporate bonds (3 Years)
still trade at 8.5 levels.
These are interesting times or we call it special situations which throw special opportunities for investment. Hence, we believe the near term appears
to be bullish for bond markets. We believe that the best strategy may be to create a portfolio with maturity in the range of 2-5 years along with
accumulating spread assets to give better carry to the portfolio. Having said that, we remain cognizant of managing the liquidity, concentration, credit
and duration in our accrual portfolios to provide investor with better risk adjusted returns. We recommend investors with an appetite for volatility to
invest in Dynamic Duration Schemes.
Debt Valuation Index considers WPI, CPI, Sensex YEAR-ON-YEAR returns, Gold YEAR-ON-YEAR returns and Real estate YEAR-ON-YEAR returns over G-Sec yield, Current Account Balance and Crude Oil Movement for
calculation.
Debt Valuation Index
Our Outlook

3. Our Recommendation
Our Recommendations
Cash
Management
Schemes
ICICI Prudential Floating Interest Fund (An open ended debt scheme predominantly investing in
floating rate instruments (including fixed rate instruments converted to floating rate exposures
using swaps/derivatives)
ICICI Prudential Ultra Short Term Fund (An open ended ultra-short term debt scheme investing in
instruments such that the Macaulay duration of the portfolio is between 3 months and 6 months)
ICICI Prudential Savings Fund (An open ended low duration debt scheme investing in
instruments such that the Macau- lay duration of the portfolio is between 6 months and 12
months.)
These schemes aim
to benefit from better
risk adjusted returns
Short Duration
Schemes
ICICI Prudential Short Term Fund (An open ended short term debt scheme investing in
instruments such that the Macaulay duration of the portfolio is between 1 Year and 3 Years)
ICICI Prudential Banking & PSU Debt Fund (An open ended debt scheme predominantly
investing in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions
and Municipal Bonds)
ICICI Prudential Corporate Bond Fund (An open ended debt scheme predominantly investing in
AA+ and above rated corporate bonds.)
These schemes aim
to benefit from
mitigating interest
rate volatility
Accrual Schemes
ICICI Prudential Medium Term Bond Fund (An open ended medium term debt scheme investing
in instruments such that the Macaulay 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)
These schemes aim
to benefit from
capturing yields at
elevated levels.
Dynamic Duration
Scheme
ICICI Prudential All Seasons Bond Fund (An open ended dynamic debt scheme investing across
duration)
This scheme aims to
benefit from volatility
by actively managing
duration.
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. Note: 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.
Riskometers
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 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.

4. 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 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.
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.
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 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 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.

5. 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.
Mutual Fund investments are subject to market risks, read all scheme related documents
carefully.
In preparation of the material contained in this document, ICICI Prudential Asset Management Company Limited (the AMC) has used information that is
publicly available, including information developed in-house. 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. The AMC (including its affiliates), the Mutual Fund, the trust and any of its officers, directors, personnel and employees, shall not be 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. The recipient alone shall be fully responsible/are liable for any decision taken on this material. All figures
and other data given in this document are dated and the same may or may not be relevant in future. The information contained herein should not be construed
as a forecast or promise nor should it be considered as an investment advice. 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. The sector(s)/stock(s)
mentioned in this communication do not constitute any recommendation of the same and ICICI Prudential Mutual Fund may or may not have any future
position in these sector(s)/stock(s). Past performance may or may not be sustained in the future. The portfolio of the scheme is subject to changes within the
provisions of the Scheme Information document of the scheme. Please refer to the SID for more details.
The information contained herein is only for the purpose of information and not for distribution and do not constitute an offer to buy or sell or solicitation of any
offer to buy or sell any securities or financial instruments in the United States of America ("US") and/or Canada or for the benefit of US persons (being persons
falling within the definition of the term "US Person" under the US Securities Act, 1933, as amended) or persons residing in Canada.
Disclaimer