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Bsl dynamic bond fund jan 2013

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  • 1. gs vin sSa ution So l Birla Sun Life Dynamic Bond Fund (An Open-ended Income Scheme) January 2013 Know Your Fund • It is an actively managed income scheme that is largely driven by two guiding factors: • “Absolute return bias” where it endeavors to preserve the purchasing power of the capital. • Generating “total returns” that comprises of capital gains and interest income o For the purpose of exploring avenues of capital appreciation, it seeks to invest in government securities, corporate bonds etc. o To capture higher interest income, it seeks to invest in structured credit instruments • Within the provisions and limitations of the SID, the scheme intends to limit the modified duration to go beyond 3.5 years, as Fund manager believes that otherwise it may become harder to preserve the purchasing power of capital. • It may be considered by investors with investment horizon of 9 months and above. Outlook Domestic Growth Outlook: There are 2 lens to look at the Indian growth picture in 2012. On one hand, we can be concerned at 5.3-5.5% growth in the first 9 months of 2012 – the last time growth had fallen below 6% was in the FY01-FY03 period. On the other side, we can be optimistic that growth deceleration seems to be over and there are a number of signs that growth recovery will happen in calendar year 2013. Perhaps, the most encouraging sign for growth bottoming out is that industrial growth (as reflected by IIP) seems to have flat-lined for the last 7-8 months and is showing early signs of pick-up in October 2012 and November 2012. Overall, our sense is that as India’s bottoming out process plays out FY13 GDP growth will be in the 5-5.5% range and that growth will pick- up to 6.5% in FY14. A key assumption in our growth forecast is that government will continue with its reform momentum started in September 2012 and that initiatives such as CCI ( cabinet committee on Investments) will help resolve the significant number of big investment projects “stalled” due to regulatory, environmental and land acquisition clearances. According to the latest data released by CMIE, we have almost 8 trillion rupees of investment projects that have been stalled due to the above factors. The key risks to our growth recovery view is two-fold. Firstly, growth problems resurface in US and Europe and renewed concerns regarding economic slowdown in the west starts to impact our business sentiment and exports – just like it has happened in the last 2 years. But because of the significant quantitative easing introduced by western central banks, we assign a low probability to global growth problems resurfacing in the near term. Second concern is that government gives up on the reform initiative and starts focusing on populist measures such as the food security bill. As of now, we remain cognizant of these risks but still expect growth to recover to around 6.5% in FY14. Domestic Inflation Outlook: As we have been mentioning in our earlier monthly outlooks, there are 2 developments in India’s macro-economic picture that really stand out over the last 12-18 months. Firstly, despite a ~400bps slowdown in growth from the 8.4% in FY11 to 5-5.5% in FY13, inflation has remained at persistently high levels. In fact, average inflation at 7.6% for the first 11 months of 2012 is almost 250-300bps away from the stated 4-5% comfort zone of RBI. Secondly peculiar development regarding our macro picture is the high levels of trade deficit despite our growth slowdown. Coming back to the inflation picture, there are some positive signs emerging. Firstly, inflation (as measured by WPI) has moderated from ~8- 8.1% in Aug-Sep’12 to 7.24% in Nov’12. Another big positive on the inflation front is that despite unlimited quantitative easing announced by The above parameters are indicative and can change from time to time at the discretion of the fund manager. Internal views, estimates, opinions of Birla Sun Life Asset Management Company Ltd. (BSLAMC) expressed herein may or may not materialize. These views, estimates, opinions alone are not sufficient and should not be used for the development or implementation of an investment strategy. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information Document (SID) of the scheme. Please refer to the SID for asset allocation, investment strategy and scheme specific risk factors. Forward looking statements are based on internal views and assumptions and subject to known and unknown risks and uncertainties which could materially impact or differ the actual results or performance from those expressed or implied under those statements. Private & confidential. For internal circulation only Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
  • 2. western central banks over last 3-4 months, global commodity prices have remained largely range bound. Historically, global commodityprices have had a significant correlation with India’s wholesale price index. Overall, our sense is that benign global commodity prices andthe recent growth slowdown could result in inflation moderating to 6.5% in 2013.We actually think recent articles by government sources that diesel and kerosene prices would be increased over the next 10-12 months is asignificant positive as it releases our suppressed inflation and thus removes one of RBI’s key concerns regarding lowering interest rates.Bond Market OutlookIn the month of November 2012 net supply of GOIs was negative on account of OMOs conducted by RBI. This helped GOI to recover lostground towards November 2012 end. A small fear of excess borrowing announcement was still lurking in the minds of some participants.However at the (December 2012) month end, Finmin removed all the apprehensions about extra borrowing by making it clear to the marketthat no extra borrowing would be done through dated GOIs in FY13. This clarity along with tweaking of borrowing calendar for rest of thefinancial year fuelled a huge rally and took 10 year benchmark GOI to 8% in January. As mentioned in our past outlooks, our strategy ofpreferring GOIs over other curves has earned us rich dividend.We have a key monetary policy at the end of January 2013. RBI is widely expected to reduce policy rates in this policy. Further, as per newcalendar, there is only one GOI auction scheduled in the January 2013. All these factors shall help the rate markets to hold gains. From ourportfolio point of view, we are constantly watching GOI, SDL and AAA Non-SLR curves for their relative richness and depending upon ourassessment of value in any of the curves we would look to realign our portfolios going forward.Overall we stick to our view that we could witness about 75-100 bps rate cut over the next one year and that the rate cut cycle could unfoldgradually giving decent opportunity to the investors to benefit from it. Portfolio Action and StrategyThe portfolio consists of a mix of short term and long term SLR/non SLR securities. In the month of December 2012, we increased theexposure to CDs, along with PSU bonds and reduced the exposure of SLR securities which as on 31 December 2012 is around22.19% of the net assets. Going forward, we may realign the portfolio depending on the relative richness and assessment of the yieldcurves. The modified duration as on 31 December 2012 is 3.27 years. The YTM of the scheme as on 31 December 2012 is 9.12%.The above parameters are indicative and can change from time to time at the discretion of the fund manager.Internal views, estimates, opinions of Birla Sun Life Asset Management Company Ltd. (BSLAMC) expressed herein may or may not materialize. These views, estimates,opinions alone are not sufficient and should not be used for the development or implementation of an investment strategy. The portfolio of the scheme is subject to changeswithin the provisions of the Scheme Information Document (SID) of the scheme. Please refer to the SID for asset allocation, investment strategy and scheme specific riskfactors. Forward looking statements are based on internal views and assumptions and subject to known and unknown risks and uncertainties which could materially impact ordiffer the actual results or performance from those expressed or implied under those statements.Private & confidential. For internal circulation only Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
  • 3. Fund Details Investment ObjectiveFund Manager : Mr. Maneesh Dangi An Open-ended income scheme with the objective to generate optimal returns with high liquidity through active management of the portfolioManaging Fund Since : June 18, 2009 by investing in high quality debt and money market instruments.Total Experience : 11 yearsDate of inception : September 27, 2004 Rating ProfileNature of the scheme : An Open-ended Income SchemeKey Features AAA 48.49%Default option : Quarterly Dividend ReinvestmentMonthly Dividend Sweep Option Sovereign 22.19%Fresh Purchase : ` 5 lacsAdditional Purchase : ` 1000/- AA 21.11%For Other OptionFresh Purchase : ` 5000/- Cash & Current Assets 5.89%Additional Purchase : ` 1000/- Below AA 2.31%Redemption Cheques : Within 10 working daysissuedSystematic Investment : AvailablePlan (SIP)Systematic Withdrawal : Available Portfolio & Asset AllocationPlan (SWP) Issuer % to Net Rating Issuer % to Net RatingSystematic Transfer : Available Assets AssetsPlan (STP) Corporate Debt 42.69 8.33% GOI - 07-Jun-2036 0.14 Sovereign Housing Development Finance 6.79 CRISIL AAA 8.28% GOI - 15-Feb-2032 0.07 Sovereign Corporation Ltd.** Money Market Instruments 14.45Plans / Options & NAV* (As on December 31, 2012) LIC Housing Finance Ltd.** 6.32 CRISIL AAA Bank of Baroda 4.08 [ICRA] A1+Growth : 19.3974 RHC Holding Private Ltd.** 2.21 BWR A1(SO) Oriental Bank of Commerce 2.84 CRISIL A1+ Reliance Utilities & Power Private Ltd.** 2.21 CARE AAA Power Finance Corporation Ltd. 2.63 CRISIL A1+Quarterly Dividend : 11.6264 Shriram Transport Finance Company Ltd.** 2.82 CRISIL AA Morgan Stanley India Capital Pvt Ltd. 1.51 FITCH A1+Monthly Dividend : 10.5586 Cholamandalam Investments & 2.33 [ICRA] AA Corporation Bank 1.10 CRISIL A1+Quarterly Average AUM : ` 14,481.44 Crores Finance Company Ltd.** Shapoorji Pallonji & Company Ltd. 0.87 [ICRA] A1+ TRIL Infopark Ltd.** 1.71 BWR A(SO) Punjab & Sind Bank 0.75 [ICRA] A1+Benchmark : CRISIL Composite Bond Fund Axis Bank Ltd.** 1.70 [ICRA] AAA State Bank of Hyderabad 0.31 [ICRA] A1+ Index Aditya Birla Finance Ltd.** 1.59 [ICRA] AA Andhra Bank 0.17 CARE A1+ Shriram Transport Finance Company Ltd.** 1.54 CARE AA+ State Bank of Travancore 0.16 CRISIL A1+ Fullerton India Credit Company Ltd.** 1.39 [ICRA] AA+ Canara Bank 0.03 CRISIL A1+Load Structure (Incl. for SIP) Godrej Consumer Products Ltd.** 1.38 [ICRA] AA Bank of India 0.00 CRISIL A1+Entry Load : Nil IDFC Ltd.** 1.37 [ICRA] AAA PSUs 12.87 Tata Capital Financial Services Ltd.** 1.02 CARE AA+ National Bank for Agriculture & 3.81 CRISIL AAA Reliance Ports & Terminals Ltd.** 0.90 CARE AAAExit Load** : For redemption/switch-out of units Rural Development ** Tata Motors Finance Ltd.** 2.09 CRISIL AA- within 180 days from the date of Power Finance Corporation Ltd.** 3.78 CRISIL AAA Indiabulls Financial Services Ltd.** 0.69 CARE AA+ allotment: 0.50% of applicable IDBI Bank Ltd.** 2.76 CRISIL AA+ Small Industries Development Bank of India ** 0.68 CRISIL AAA NAV. Power Finance Corporation Ltd. 2.02 CRISIL AAA Union Bank of India** 0.68 CRISIL AAA Rural Electrification Corporation Ltd.** 0.44 CRISIL AAA For redemption/switch-out of units ICICI Home Finance Company Ltd.** 0.65 CARE AAA Indian Railway Finance Corporation Ltd.** 0.04 CRISIL AAA after 180 days from the date of Coffee Day Resorts Private Ltd.** 0.61 BWR A+ Hindustan Petroleum Corporation Ltd.** 0.02 CRISIL AAA allotment: Nil. Sterlite Industries (India) Ltd.** 0.54 CRISIL AA+ Sundaram Finance Ltd.** 0.41 [ICRA] AA+ State Government Bond 4.49 (w.e.f February 01, 2012.) Tata Sons Ltd.** 0.40 CRISIL AAA 9.01% WB SDL 21-Nov-2022 1.51 Sovereign **Exit Load is NIL for units issued in Bonus Sundaram Finance Ltd.** 0.34 FITCH AA+ 8.97% Bihar SDL 21-Nov-2022 1.10 Sovereign & Dividend Reinvestment. Reliance Gas Transportation 0.21 CARE AAA 8.93% Kerala SDL 21-Nov-2022 0.70 SovereignOther Parameter 8.90% TN SDL - 20-Sep-2022 0.27 Sovereign Infrastructure Ltd.**Modified Duration : 3.27 Years Reliance Gas Transportation 0.04 CRISIL AAA 9.12% Gujarat SDL - 23-May-2022 0.24 Sovereign Infrastructure Ltd.** 8.90% Maharashtra SDL - 20-Sep-2022 0.21 SovereignYield to Maturity : 9.12% Export-Import Bank of India** 0.03 CRISIL AAA 8.90% UP SDL - 20-Sep-2022 0.17 SovereignStandard Deviation : 1.08% IDFC Ltd.** 0.03 [ICRA] AAA 9.17% UP SDL - 23-May-2022 0.16 Sovereign Small Industries Development Bank of India ** 0.02 CARE AAA 8.92% Kerala SDL - 08-Aug-2022 0.14 Sovereign Government Bond 17.70 Floating Rate Instruments 1.90 8.33% GOI - 09-Jul-2026 6.34 Sovereign Power Finance Corporation Ltd.** 1.90 CRISIL AAANote:Standard Deviation is calculated on annualised basis using 1 year history of monthly 8.20% GOI - 24-Sep-2025 5.60 Sovereign Cash & Current Assets 5.89returns, source: MFI Explorer. 8.07% GOI - 03-Jul-2017 2.72 Sovereign*Pursuant to provisions of SEBI Circular No. CIR/IMD/DF/21/2012 dated Total Net Assets 100.00 8.19% GOI - 16-Jan-2020 1.20 SovereignSeptember 13, 2012, a separate plan for direct investments (i.e. investments notrouted through Distributor shall be available under the Schemes with effect from 8.97% GOI - 05-Dec-2030 0.94 SovereignJanuary 1, 2013. The said ‘Direct Plan’ is only for investors who purchase /subscribe 9.15% GOI - 14-Nov-2024 0.69 SovereignUnits in a Scheme directly with the Fund and is not available for investors who routetheir investments through a Distributor. All Plans / Options / Sub-Options offeredunder the Schemes (other than discontinued plans/options) will also be available for ** Represents thinly traded/ non traded securities and illiquid securities. Total Percentage of thinly/non traded securities is 55.44%.subscription under the Direct Plan. For further details, Investors are requested torefer to Addendum no. 44/2012 dated December 27, 2012.All data provided are as on December 31, 2012 unless otherwise providedDisclaimer: This document is strictly confidential and meant for private circulation only and should not at any point of time be construed to be an invitation to the public for subscribing to the units ofBirla Sun Life Mutual Fund. Please note that this is not an advertisement. The document is solely for the information and understanding of intended recipients only. If you are not the intended recipient,you are hereby notified that any use, distribution, reproduction or any action taken or omitted to be taken in reliance upon the same is prohibited and may be unlawful. Views expressed herein shouldnot be construed as investment advice to any party and are not necessarily those of Birla Sun Life Asset Management Company Ltd.(BSLAMC) or any of their officers, employees, personnel,directors and BSLAMC and its officers, employees, personnel, directors do not accept responsibility for the editorial content. Wherever possible, all the figures and data given are dated, and the samemay or may not be relevant at a future date. Further the opinions expressed and facts referred to in this document are subject to change without notice and BSLAMC is under no obligation to updatethe same. While utmost care has been exercised, BSLAMC or any of its officers, employees, personnel, directors make no representation or warranty, express or implied, as to the accuracy,completeness or reliability of the content and hereby disclaim any liability with regard to the same. Recipients of this material should exercise due care and read the scheme information document(including if necessary, obtaining the advice of tax/legal/accounting/financial/other professional(s) prior to taking of any decision, acting or omitting to act. Further, the recipient shall notcopy/circulate/reproduce/quote contents of this document, in part or in whole, or in any other manner whatsoever without prior and explicit approval of BSLAMC.Mutual Fund: Birla Sun Life Mutual FundAsset Management Company/ Investment Manager: Birla Sun Life Asset Management Company LimitedRegistered Office: One India Bulls Centre, Tower - 1, 17th Floor Jupiter Mill Compound, 841, S. B. Marg, Elphinstone Road, Mumbai - 400013. Private & confidential. For internal circulation only Mutual Fund investments are subject to market risks, read all scheme related documents carefully.