Currently, valuations seem reasonable for long term investment, Business Cycle has bottomed out and relatively low FII flows have been recorded. Our framework suggests that it is time to accumulate equities and stay invested for long term.
2. 2
Global Indices Performance
Global equities rejoiced the
re-opening of economies,
positive US macro data, re-
confirmation of US-China
Phase 1 trade deal by the
US and continued liquidity
support by US Fed
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. GDP – Gross Domestic Product. Data Source: MFI & ACEMF JP Morgan; Returns are absolute returns for the index calculated between May 31, 2020 – June 30, 2020. Past performance may or may
not sustain in future. US Fed – US Federal Reserve. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit http://www.icraonline.com/legal/standard-disclaimer.html.
8.8
7.7
6.4 6.2 6.2
5.1 5.0 4.6
3.9
3.2 3.2
2.2 1.9 1.7 1.5
-0.6
-2
0
2
4
6
8
10
Brazil
India
HongKong
Germany
Taiwan
France
Europe
China
SouthKorea
Indonesia
Singapore
Switzerland
Japan
US
UK
Russia
Returns(%)
Returns Performance - June 2020
3. 3
India – Sectoral Indices Performance
• Banking and Finance
gained as better than
expected manufacturing
PMI improved sentiment
in the lending space
• Telecom relatively
underperformed due to
no immediate relief by
the Supreme Court on
AGR dues
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, ACEMF ; Returns are absolute returns for the TRI variant of the index (except Infrastructure Index) calculated
between May 31, 2020 – June 30, 2020; Past performance may or may not sustain in future. The sector(s)/stock(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 sector(s)/stock(s). PMI – Purchasing Managers’ Index, AGR – Adjusted Gross Revenue. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit
http://www.icraonline.com/legal/standard-disclaimer.html.
13
12 12
10
8
8 7 7 7 6 6 6
4 4 4 4
0
4
8
12
16
Energy
Realty
Finance
Bankex
Auto
Infra
CD
Oil&Gas
BasicMat.
Power
Metal
IT
CG
HC
FMCG
Telecom
Returns(%)
Returns Performance - June 2020
6. 6
Buy – Valuations Cheap
Sell – Valuations
Expensive
Buy – Cycle is weak
Sell – Cycle is Strong
Triggers – Unpredictable
event like COVID-19
Buy – Negative
Sentiments
Sell – Positive
Sentimenst
Market Valuations Business Cycle Triggers Sentiments
P/E or P/B helps in
ascertaining whether
the market is expensive
or cheap
Indicators like capacity
utilization / credit
growth help in gauging
the strength of
business cycle
Sentiments helps in
understanding investors
affinity towards the
equity market
Triggers are events
which can chart the
course of market
direction
(positive/negative)
Currently, valuations seem reasonable for long term investment, Business Cycle has bottomed out and relatively low FII
flows have been recorded. Our framework suggests that it is time to accumulate equities and stay invested for long term
P/E – Price-to-Earnings; P/B – Price to Book Value Ratio; COVID-19 is Coronavirus disease 2019, FII – Foreign Institutional Investor.
Our ‘VCTS’ Framework –
Invest with a Long Term view
7. 7
Valuations
Excluding select growth stocks (top 10 stocks of Nifty 50 Index), market valuations are reasonable for long term investment
4.0
2.2
2.0
3.0
4.0
5.0
Dec-18
Feb-19
Apr-19
Jun-19
Aug-19
Oct-19
Dec-19
Feb-20
Apr-20
Jun-20
P/B(x)
Nifty 50 Index –
Nifty Top 10 P/B Vs. Nifty Bottom 40 P/B
Nifty 10 Ex Bottom 40 Nifty 40 Ex Top 10
P/E – Price to Earnings, P/B: Price to Book. Ex – Excluding. Source : NSE, Capitaline, Data as of June 30, 2020. Past performance may or may not sustain in future.
30.1
20.0
19.0
24.0
29.0
34.0
39.0
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
Jun-20
P/E(x)
Nifty 50 Index –
Nifty Top 10 P/E Vs. Nifty Bottom 40 P/E
Nifty 10 Ex Bottom 40 Nifty 40 Ex Top 10
8. 8
Valuations
The Marketcap to
GDP ratio is at 71%
which is below its
historic average of
77% indicating
reasonable
valuations
71
50
60
70
80
90
100
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
(%)
India Market cap to GDP ratio
Average: 77
Source: Edelweiss Research; Data as of June 30 2020; GDP - Gross Domestic Product
9. 9
Cycle
A key measure to assess demand & subsequently business cycle, Credit Growth has moderated from 15% to 6%.
This highlights that we are at the bottom of the Business Cycle
15%
6%
10%
11%
6%
8%
10%
12%
14%
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Credit & Deposit Growth (YoY)
Credit Growth (YoY) Deposit Growth (YoY)
151%
55%
50%
70%
90%
110%
130%
150%
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Incremental Credit to Deposit Growth
Source: RBI, Data as of June 5, 2020
10. 10
Source: RBI. Data as of Dec 31, 2019.
Cycle
68.6
68
70
72
74
76
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
Sep-19
Dec-19
Capacity Utilization (%)
Average: 72.8 Capacity Utilization
which is an indicator of
the Business Cycle the
economy is in, is below
historic average. This
indicates that we are in
the bottom of the
Business Cycle
11. 11COVID-19 – Coronavirus Disease 2019 Source: WHO
Triggers
Triggers that may chart the future course of market direction
01
03
02
04
Markets to remain watchful of the second wave of COVID-19 led infections
Trajectory of COVID-19 Growth Curve
Though US re-affirmed its phase 1 trade deal with China, the simmering tensions
between the 2 countries over COVID-19 spread may affect markets
US-China Trade Tensions
The expected time frame for COVID-19 vaccine development is 12-18 months. Any
encouraging results from vaccine trials will be closely monitored
Vaccine Development
With the on-going Border tensions, India aims for lesser trade dependency on China
which may have an impact on markets
India-China Border Tensions
12. 12
Relatively low FPI flows compared to past trends seen, indicate negative sentiments around equity as an asset class
Sentiments
39,631
46,939 44,937
-48,030
29,517
-60,000
-40,000
-20,000
-
20,000
40,000
60,000
Jan-Mar2017
Apr-Jun2017
July-Sep2017
Oct-Dec2017
Jan-Mar2018
Apr-Jun2018
July-Sep2018
Oct-Dec2018
Jan-Mar2019
Apr-Jun2019
July-Sep2019
Oct-Dec2019
Jan-Mar2020
Apr-Jun2020
FPI Net Flows (in Rs. Crs)
Source: NSDL, FPI – Foreign Portfolio Investment. Data as of June 30, 2020
13. 13
Sentiments
Recent Covid-19 led market corrections have resulted in relatively low returns generation in
equity as an asset class indicating neutral sentiments
Source: Value Research, Data as of June 30, 2020. Scheme and peer group categorization is as per Value Research classification. Returns are in CAGR terms. Past performance may or may not sustain in future
-13%
-11%
-14%
-16%
-12%
1%
-2%
0%
-5%
4%5% 4% 4% 4%
6%
9%
11%
9% 10%
8%
-20%
-10%
0%
10%
Largecap Funds Midcap Funds Multicap Funds Smallcap Funds Nifty 50 TRI
Avg. Performance of Largecap, Midcap & Smallcap Funds
1Y 3Y 5Y 10Y
15. 15
Private Sector Debt – Substantially Low
Source: Bank of International Settlements. Data as of Dec 19, 2019. US – United States of America
56.2
150.3
204.6
0
50
100
150
200
Dec-85
Dec-87
Dec-89
Dec-91
Dec-93
Dec-95
Dec-97
Dec-99
Dec-01
Dec-03
Dec-05
Dec-07
Dec-09
Dec-11
Dec-13
Dec-15
Dec-17
Dec-19
PrivateSectorDebttoGDP(%)
Private Sector Debt to GDP (%)
India Pvt Sector Debt to GDP (%) US Pvt Sector Debt to GDP (%) China Pvt Sector Debt to GDP (%)
India’s debt is substantially lower than the major economies indicating that Indian economy is stable
16. 16
Demographics
Source: International Labor Organization (ILO). *Includes Arab states, Pakistan, Bangladesh, Iran, Iraq, etc. Data as of March 2020. Data is calculated based on ILO estimates
• Over the coming decade,
India is expected to
contribute around 23% to
world’s incremental labour
force
• This could be the largest
amongst Emerging Market
Economies
• Good demographics
generally support higher
investment/savings
23%
20%
4%
1%
1%
1%
-1%
-3%
-6%
-10% 0% 10% 20% 30%
India
Islamic states*
Indonesia
Brazil
United States
South Africa
Russia
EU (28)
China
Proportion of worlds incremental labor force (2020 to 2030)
17. 17
Healthy Forex Reserves
Source: RBI. Data as of June 19, 2020. Forex – Foreign Exchange Reserves
India’s foreign exchange reserves have increased substantially.
The reserves are sufficient to cover 12 months of imports
412
419 422
428 430 429 434
443
451
457
471
482
476 479
490
506
380
400
420
440
460
480
500
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
India Forex Reserves (USD Bn)
18. 18
Current Account Deficit to Surplus
Source: RBI. Data as of March 2020.
India’s Current Account Deficit has turned into surplus in Q4FY20
-2.1
-1.84
-2.3
-2.9
-2.7
-0.7
-2.0
-0.9
-0.4
0.1
-3.5
-2.5
-1.5
-0.5
0.5
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
Mar-20
India's Current Account Balance (% of GDP)
20. 20
Emerging Markets & Value Theme
Source: Morgan Stanley. Data as of May 31, 2020. Past performance may or may not sustain in future. DM – Developed Markets, EM - Emerging Markets, GFC – Global Financial Crisis
Post GFC in 2008, Emerging Markets recovered
better than Developed Markets.
91
81
40
50
60
70
80
90
100
Jun-08
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
MSCI Emerging Vs. Developed Market Index
MSCI Emerging Markets Index MSCI World with DM Exposure Index
35
55
75
95
Dec-07
Oct-08
Aug-09
Jun-10
Apr-11
Feb-12
Dec-12
Oct-13
Aug-14
Jun-15
Apr-16
Feb-17
Dec-17
Oct-18
Aug-19
MSCI Emerging Vs. Value Index
MSCI Emerging Markets Index MSCI EM Value Index
May-20
Historically, Value theme has performed
in tandem with Emerging Markets
Given the recent market corrections due to COVID-19, we expect Emerging Markets to
recover better with Value theme performing better than the growth theme
21. 21
Emerging Markets – Value Vs. Growth
Historically, post market corrections, ‘Value’ theme has recovered better than ‘Growth’ theme
Year
Returns post Corrections
MSCI India Value Index MSCI India Growth Index
2008 to 2009 (Lehman Crisis) 116% 110%
2013 to 2014 (Taper Tantrum) 41% 35%
Feb-16 to Nov-16* (China Crisis) 15% 11%
2018 to 2019 (NBFC Crisis) 10% 7%
Source: Edelweiss Research. Past performance may or may not sustain in future. * All returns mentioned are 1Y returns except for Feb-16 to Nov-16. For 2008 to 2009, Period considered is 20-Nov-08 to 20-Nov-09, For 2013 to 2014,
Period considered is 31-Aug-13 to 31-Aug-14. For 2018 to 2019, Period considered is 30-Nov-18 to 31-Dec-19. Returns mentioned are in absolute terms. Past performance may or may not sustain in future
22. 22
Sectoral Leadership has changed in
the past with every Crisis
Nifty 50 Index Constituents – The Great Churn
2000 (Dot Com Bubble) 2008 (Lehman Crisis) Now (COVID-19 Pandemic)
Sector Weightage
CONSUMER GOODS 27.5%
OIL & GAS 24.2%
IT 12.2%
FINANCIAL SERVICES 10.1%
PHARMA 7.2%
Sector Weightage
OIL & GAS 19.3%
TELECOM 9.7%
FINANCIAL SERVICES 8.9%
POWER 5.5%
CONSTRUCTION 3.6%
Sector Weightage
FINANCIAL SERVICES 34.4%
OIL & GAS 14.8%
IT 14.2%
CONSUMER GOODS 13.5%
AUTOMOBILE 5.5%
Data as of June 30, 2020. Source: NSE. 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)/sector(s). Since
COVID-19 is an on-going pandemic, further change in sectoral leadership can be expected
Aim to invest in potential future leaders
23. 23
Marketcap Divergence
Top 100 indicates top 100 companies by market capitalization,101-250 indicates next 150 companies by market cap and above 250 indicates companies post the top 250 companies by market cap. Source: Capitaline, Data as of Jun 30,2020
Share in the Overall Market Cap (%)
Index 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Mar-20 Apr-20 May-20 Jun-20
Top-
100
79 75 74 71 79 77 78 79 78 81 75 74 72 65 70 76.0 75.3 75.4 74.5
101-
250
11 12 12 13 11 12 13 13 14 13 14 15 15 16 16 15.2 15.1 15.1 15.5
Above
250
11 13 14 16 10 11 9 8 8 6 10 11 14 18 14 8.7 9.5 9.4 9.9
Smallcap space looks attractive from valuations point of view
24. 24
• ‘Value’ theme expected to recover and perform better over long term –
Invest in schemes with Value Bias
RECOMMENDATIONS
• Aim to benefit from on-going temporary crisis due to COVID-19 – Invest in
schemes that aim to benefit from special situations
• Aim to benefit from recent correction in smallcap space and subsequent
reasonable valuations – Invest in schemes with smallcap bias
• Sectoral leadership changes with every crisis – Invest in potential
future leaders through high conviction ideas
25. 25
Value Investing through
ICICI Prudential Value Discovery Fund
PORTFOLIO POSITIONING
Top 10 Sector Holdings % to NAV
Software 15.2%
Pharmaceuticals 12.2%
Auto 9.3%
Power 7.2%
Telecom - Services 7.0%
Auto Ancillaries 4.6%
Pesticides 4.2%
Transportation 4.2%
Consumer Non Durables 3.9%
Finance 3.8%
Our View on Select Overweight & Underweight Sectors
• Software – Comfortable Valuations, Strong Balance Sheet, high cash to survive
disruption, global presence, better diversification and Good earnings visibility are few
factors that make this sector a value proposition
• Pharmaceuticals – Sector valuations are reasonable, has underperformed markets in
the recent past, earnings visibility is high and is a good defensive play in times of volatility
• Power – The sector is currently providing a good dividend yield, high earnings visibility
with attractive valuations and companies within the sector are Fixed ROE (Return on
Equity) business
• Banking & Financials – The scheme is underweight on this sector as valuations are
high, the sector represents almost 40% of the broader index and the economic slowdown
due to COVID-19 may hurt the sector due to higher NPA (Non-Performing Assets and lower
NIM (Net Interest Margin)
Data as of June 30, 2020. Source: MFIE 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)/sector(s).
Under/Over weight sectors are determined with respect to the benchmark i.e. Nifty 500 Value 50 TRI. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit
http://www.icraonline.com/legal/standard-disclaimer.html.
26. 26
ICICI Prudential Focused Equity Fund –
Focused on future potential leaders
Data as of June 30, 2020. Source: MFIE. 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)/sector(s). MFI
Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit http://www.icraonline.com/legal/standard-disclaimer.html.
PORTFOLIO POSITIONING
Top 10 Sector Holdings % to NAV
Software 14.8%
Telecom 8.3%
Pharmaceuticals 8.2%
Auto 7.5%
Power 6.8%
Non Ferrous Metals 5.9%
Consumer Non Durables 5.4%
Finance 5.4%
Banks 4.9%
Auto Ancillaries 4.8%
• Software
• Power
• Telecom
• Auto Ancillaries
• Metals & Mining
Overweight
Sectors
Underweight
Sectors
• Retailing
• Industrial Products & Capital
Goods
• Consumer Non Durables
• Banks & Finance
Overweight / Underweight sectors relative to the
benchmark i.e. S&P BSE 500 Index
27. 27
ICICI Prudential India Opportunities Fund
Aim to benefit from the opportunities arising out of the on-going temporary crisis due to the
economic fallout from COVID-19 through a special situations theme based fund
Government Action/
Regulatory Changes
Special Situation due to temporary Crisis
in a. Company b. Sectors c. Economy
Global
Events/Uncertainties
The above list is illustrative and not exhaustive, there may be several other opportunities that may give rise to special situations
28. 28
ICICI Prudential Smallcap Fund
Solid research &
screening process
Well Defined
Investment Strategy
& Portfolio Construct
Young and Agile:
AUM as on June 30, 2020
is Rs. 1,111 Crs
Solid Investment
Process
The asset allocation and investment strategy of the scheme will be as per the Scheme Information Document
29. 29
Our Asset Allocation Bouquet to manage volatility
ICICI Prudential Regular
Savings Fund*
ICICI Prudential Equity
Savings Fund
15 - 50%
ICICI Prudential Balanced
Advantage Fund
30 - 80%
ICICI Prudential
Multi-Asset Fund
10 - 80%
ICICI Prudential Asset Allocator Fund (FOF)*^
ICICI Prudential Equity
& Debt Fund
65 - 80%
10 - 25%
0-100%
The asset allocation and investment strategy will be as per the Scheme Information Document, *These schemes 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.
30. 30
ICICI Prudential Balanced Advantage Fund –
Equity Allocation Journey Vs. Market movement
Source: BSE India & MFI, Data as of June 30, 2020. The in-house valuation model starts from March 2010 onwards. ICICI Prudential BAF stands for ICICI Prudential Balanced Advantage Fund. The asset allocation and investment
strategy will be as per Scheme Information Document. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit http://www.icraonline.com/legal/standard-disclaimer.html
24871
3491678
68
30
40
50
60
70
80
15000
20000
25000
30000
35000
40000
Mar-10
Jun-11
Sep-12
Jan-14
Apr-15
Aug-16
Nov-17
Feb-19
ICICIPrudentialBalancedAdvantage
FundNetEquityExposure(%)
S&PBSESensexLevels
S&P BSE Sensex Levels vis-a-vis ICICI Prudential BAF Net Equity Exposure (%)
S&P BSE Sensex Net Equity Exposure %
June20
31. 31
Scheme that aims to ALLOCATE to the
Right ASSET at the Right TIME
Presenting ICICI Prudential Asset Allocator Fund (FOF)
The Right Allocation is not only dependent on Equity Valuation, but also on the opportunities available in Debt Market
Allocation predominantly between EQUITY & DEBT at the Right TIME –
This Scheme aims to capture the optimum allocation of Debt & Equity based on the attractiveness of one asset class over the other.
Equity Allocation Debt Allocation
Allocation between asset classes
• The Scheme is actively managed by Fund Managers having expertise of equity and debt markets
• The Scheme allocates predominantly between equity and debt mutual fund schemes based on in-house valuation model
The asset allocation and investment strategy will be as per Scheme Information Document.
32. 32
Our Equity Outlook
• Our ‘VCTS’ framework (Valuations, Cycle, Trigger, Sentiments) is currently indicating that it is a good time to accumulate equities
and stay invested across market ups and downs for long term
• India’s long term growth story remains intact since it is better placed in terms of fundamentals
• We believe, Emerging Markets have the potential to recover better than Developed Markets & that Value as a theme performs better
than Growth during recovery phase. Hence, we recommend investing in ICICI Prudential Value Discovery Fund
• Owing to the temporary economic crisis due to COVID-19, we recommend investing in ICICI Prudential India Opportunities Fund
• Given further uncertainty regarding the spread of COVID-19, US-China & India-China tensions, volatility is expected to prevail. We
recommend investing in ICICI Prudential Balanced Advantage Fund to manage volatility
• We remain positive on the Smallcap space as valuations are reasonable & recommend investing in ICICI Prudential Smallcap Fund
• Post any crisis, sectoral leadership has changed in the past. Aim to invest in future potential leaders through ICICI Prudential
Focused Equity Fund
33. 33
Time to Add Duration and Aim to Earn Carry
OUR DEBT OUTLOOK
34. 34
Reasons to add duration –
Yield Curve continues to remain steep
Yield curve is steeper in the
2-5Yrs segment. Short &
Medium Term Schemes
which aim to invest in the
2-5Yrs segment of the yield
curve are currently
providing good investment
opportunities
5.84
6.55
3
4
5
6
7
1 M 3 M 6 M 1 Year 2 Years 3 Years 5 Years 10 Years
Yield Curve – Corporate Bond and G-Sec (%)
Gsec Curve Corporate Bond Curve
Data Source: Morgan Stanley. Data as of June 30, 2020. Past performance may or may not sustain in future.
35. 35
Reasons to add duration –
RBI may remain accommodative
Data Source: RBI. Data as of June 30, 2020. RBI – Reserve Bank of India
(6)
(5)
(4)
(3)
(2)
(1)
0
1
2
3
Jan-15
Sep-15
May-16
Jan-17
Oct-17
Jun-18
Feb-19
Oct-19
Jul-20
RBI Liquidity Injected (Rs. Tn.)
System Liquidity in Deficit
System Liquidity in Surplus
RBI accommodative stance and expectation of further rates cuts is expected to benefit short to medium duration schemes
4.00
3.35
3
4
5
6
7
8
9
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
RBI Repo & Reverse Repo Rates (%)
Repo Rate (%) Reverse Repo (%)
RBI has provided 115 bps rate cut
in calendar year 2020
36. 36
Reasons to add duration –
Growth and Inflation Dynamics
Data Source: IIFL Research. Data as of June 30, 2020. MPC – Monetary Policy Committee.
We expect growth and inflation to come down, which may provide further headroom to RBI to cut rates
5.7 5.2 4.4 4.1
3.1
-13.0
-1.0
3.5
-15
-10
-5
0
5
10
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
GDP YoY (%)
6.0
0
1
2
3
4
5
6
7
8
9
10
Jan-15
Sep-15
May-16
Jan-17
Aug-17
Apr-18
Dec-18
Aug-19
Mar-20
CPI Inflation (YoY %)
MPC Upper Limit
MPC Lower Limit
37. 37
Reasons to add duration –
India Macros Strong
Fiscal Year Ends FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Latest*
Inflation (CPI%) 10.2 9.5 5.9 4.9 3.8 3.6 3.4 5.8 5.8
Current Account (% of
GDP)
-4.8 -1.7 -1.3 -1.1 -0.6 -1.9 -2.4 0.1 0.1
Fiscal Deficit (% of GDP) 4.9 4.5 4.1 3.9 3.5 3.5 3.4 4.6 4.6
Crude Oil (USD/barrel) 109 107 53 39 60 58 65 23 41
GDP Growth (%) 5.6 6.6 7.2 7.9 7.9 7.3 6.1 4.2 4.2
Forex Reserves (USD bn) 292 304 342 356 370 424 413 490 505
Currency (USD/INR) 54 60 63 66 65 65 70 75 75
Source: CRISIL Research, RBI, CCIL India, CMIE, Data as on 30-June-2020; FY refers to fiscal year ends Apr - Mar; *Inflation (CPI) is for the month of Mar-20 (data points for April & May have not been released by
the Govt.), Currency, Forex Reserves as on June 19, 2020, Current Account Deficit data & GDP Data is for FY20, Fiscal Deficit data is as of FY20.
38. 38
Reasons to add spread assets –
Attractive Valuations
4
5
6
7
8
9
10
6 Months 1 Yr 3 Yr 5 Yr
Yields(%)
Repo AAA AA
Avg
107 bps
Avg
314 bps
The spread between
Corporate Bonds and
Repo Rates remains at
attractive levels and
hence may deliver better
risk-adjusted returns
Data Source: CRISIL Research. Data as of June 30, 2020
39. 39
Attractive Valuations –
ICICI Prudential Credit Risk Fund
Data as on June 30, 2020, Source : MFI Explorer. YTM values taken since scheme inception. Past Performance may or may not be sustained in future. This graph is used to indicate current valuations and does not
indicate in any manner performance of the scheme. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit http://www.icraonline.com/legal/standard-disclaimer.html.
40. 40
Attractive Valuations –
ICICI Prudential Medium Term Bond Fund
Data as on June 30, 2020. YTM values taken for the last 10 years. Source: MFI Explorer, Past performance may or may not be sustained in the future. This graph is used to indicate current valuations and does not
indicate in any manner performance of the scheme. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit http://www.icraonline.com/legal/standard-disclaimer.html
41. 41
Reasons to add spread assets –
High Risk Aversion & Negative Sentiments
84.2 83.5
65
70
75
80
85
Jun-16 Jun-17 Jun-18 Jun-19 May-20
Share of AAA rated issuances in
NBFC debt held by MFs (%)
AAA Corporate Bond and Money Market yields have collapsed indicating risk aversion.
AA Corporate Bond yields remain elevated providing high margin of safety
4,26,819
4,99,901
5,87,067
0
1,00,000
2,00,000
3,00,000
4,00,000
5,00,000
6,00,000
7,00,000
Mar-20 Apr-20 May-20
Industry Liquid & Overnight Category
AUM (INR Crs.)
Data Source: IIFL Research. Data as of May 31, 2020. NBFC - Non Banking Financial Company, MFs – Mutual Funds, AUM – Assets Under Management
42. 42
Reason for Tactical call on G-Sec –
G-Sec & Repo Rate Spread Attractive
Source: RBI. Data as of June 30, 2020
G-Sec – Repo spread at all time high
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3
4
5
6
7
8
9
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
10YrGsec-RepoRatelSpread(%)
Repo&ReverseRepoRate(%)
Repo Rate (%) Reverse Repo (%) 10 Year Gsec - Repo Rate
Spread between G-Sec and
Repo Rate are at elevated
levels. RBI is expected to
maintain accommodative
stance. We believe that the
above stated factors make a
good case for tactical
investment in Gsec
43. 43
Our Fixed Income Outlook
• We expect growth and inflation to come down further, providing further headroom to RBI to cut rates. RBI is expected to
continue its accommodative stance
• We are comfortable with govt. measures to combat COVID-19 economic impact due to the absence of credit demand
(No crowding out effect). Expectations of RBI monetizing the fiscal deficit can keep G-Sec yields in check
• Keeping the above points in mind, we are bullish on duration and have added duration across our portfolios
• The yield curve continues to remain steep due to high risk aversion, this makes the short and medium segment of the
yield curve attractive, as they provide good risk reward benefit
• We continue to remain positive on the accrual space. The space remains attractive due to Valuation Comfort ( High
spread between Accrual schemes and repo), Negative Sentiments associated with the accrual space and negative
industry flows provides a good margin of safety
• We continue to stick to our strong Credit selection process and we remain cognizant of managing the liquidity,
concentration, credit and duration in our fixed income portfolios to provide investors with better risk adjusted returns.
44. 44
Recommendations – Surplus Parking Space
Repo Rate
Risk Reward Benefit High :
Favourable Zone
Low carry zone over repo
Add Duration and add spread assets to the portfolios
Data as of June 30, 2020
3.1 3.6
4.4
6.2
5.3
6.8
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
ICICI Prudential
Overnight Fund
ICICI Prudential
Liquid Fund
ICICI Prudential
Money Market Fund
ICICI Prudential Ultra
Short Term Fund
ICICI Prudential
Savings
ICICI Prudential
Floating Interest
Fund
YTM-30-June-2020 (%)
Fund
45. 45
Recommendations – Short Term Parking Space
Add Duration and add spread assets to the portfolios
5.8
6.0
6.2
8.4
7.9
9.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
ICICI Prudential
Corporate Bond Fund
ICICI Prudential
Banking & PSU Debt
ICICI Prudential
Short Term Fund
ICICI Prudential
Medium Term Bond
Fund
ICICI Prudential All
Seasons Bond Fund
ICICI Prudential
Credit Risk Fund
YTM -30-June-2020 (%)
Repo Rate
Risk Reward Benefit High :
Favourable Zone
Data as of June 30, 2020
46. 46
Scheme Recommendations
Recommendation Strategy Scheme Name
Aim to benefit from
Steepness of yield curve
Short and Medium Term
Schemes
ICICI Prudential Ultra Short Term Fund
ICICI Prudential Savings Fund
ICICI Prudential Short Term Fund
ICICI Prudential Banking & PSU Debt Fund
ICICI Prudential Medium Term Bond Fund
ICICI Prudential Floating Interest Fund
Aim to benefit from Accrual Credit Risk Scheme ICICI Prudential Credit Risk Fund
Aim to benefit from Duration
(Gilt coming down)
Gilt Schemes
ICICI Prudential Constant Maturity Gilt Fund
ICICI Prudential Gilt Fund
Aim to benefit from interest
rate changes
Dynamic Duration
Schemes
ICICI Prudential All Seasons Bond Fund
47. 47
Our 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.
ICICI Prudential Multicap Fund
An open ended equity scheme investing across large cap, mid cap, small cap
stocks.
ICICI Prudential India Opportunities Fund An Open Ended Equity Scheme following Special Situations theme
48. 48
Our Hybrid Schemes / Fund of Funds Scheme
Scheme Name Type of Scheme
ICICI Prudential Asset Allocator Fund (FOF)*
An open ended fund of funds scheme investing in equity oriented schemes,
debt oriented schemes and gold ETFs/schemes.
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
ICICI Prudential Equity Savings Fund An open ended scheme investing in equity, arbitrage and debt.
ICICI Prudential Equity & Debt Fund
An open ended hybrid scheme investing predominantly in equity and equity related
instruments
ICICI Prudential Multi-Asset Fund
An open ended scheme investing in Equity, Debt and Exchange Traded Commodity
Derivatives/units of Gold ETFs/units of REITs & InvITs/Preference shares
*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.
49. 49
Our Fixed Income Schemes
Scheme Name Type of Scheme
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 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 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.
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 All Seasons Bond Fund An open ended dynamic debt scheme investing across duration.
ICICI Prudential Savings Fund
An open ended low duration debt scheme investing in instruments such that the Macaulay duration of the portfolio is between
6 months and 12 months
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.
ICICI Prudential Money Market Fund An open ended debt scheme investing in money market instruments
ICICI Prudential Constant Maturity Gilt Fund An open ended debt scheme investing in government securities having a constant maturity of 10 Years
ICICI Prudential Gilt Fund An open ended debt scheme investing in government securities across maturity
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
50. 50
Riskometers
ICICI Prudential Multi-Asset Fund is suitable for investors whoare 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
51. 51
Riskometers
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 whoare 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
52. 52
Riskometers
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
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
53. 53
Riskometers
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 durationsavings
A debt scheme that invests in debt and money market instruments with a view to maximize income while maintaining optimum balance
of yield, safety andliquidity
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
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
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
54. 54
Riskometers
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 forthem
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 forthem
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 forthem
55. 55
Riskometers
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 forthem.
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 forthem
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
56. 56
Riskometers
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.
ICICI Prudential Corporate Bond Fund is suitable for investors whoare 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.
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
57. 57
Riskometers
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 advisors if in doubt about whether the product is suitable for them.
•Long Term wealth creation
•An open ended fund of funds scheme investing in equity oriented schemes, debt oriented schemes and gold ETF/schemes.
*Investorsshouldconsulttheirfinancialadvisorsif in doubt aboutwhethertheproduct is suitablefor them.
ICICI Prudential Asset Allocator Fund (FoF) (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*:
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.
ICICI Prudential Focused Equity Fund (An open ended equity scheme investing in maximum 30 stocks across market-capitalisation i.e
focus on multicap) is suitable for investors who are seeking*:
• Long term wealth creation
• An open ended equity scheme investing in maximum 30 stocks across market-capitalisation.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
58. 58
Riskometers
ICICI Prudential Liquid Fund (an open ended liquid fund) is suitable for investors who are seeking*:
Short term savings solution
A liquid fund that aims to provide reasonable returns commensurate with low risk and providing a high level of liquidity
*Investors should consult their financial advisors if in doubt about whether the product is suitable for them.
ICICI Prudential Overnight Fund (an open ended debt scheme investing in overnight securities) is suitable for investors who are seeking*:
Short term savings solution
An overnight fund that aims to provide reasonable returns commensurate with low risk and providing a high level of liquidity
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
59. 59
Disclaimer
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 pub-
licly 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 mem-
bers/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 informa-
tion. 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 Lim-
ited (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.