• Historically, financial crisis have generally occurred due to endogenous factors – economic imbalances like high crude prices, high inflation, etc. This time it is different since macros being stable, the current crisis is the result of an external factor i.e. COVID-19
• 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, 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
2. 2
Global Indices Performance
Easing of lockdown,
slowdown in infection
rate and progress around
COVID-19 vaccine
development led to
positive sentiments
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 April 30, 2020 – May 31, 2020. Past performance may or may
not sustain in future. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit http://www.icraonline.com/legal/standard-disclaimer.html. COVID-19 is Coronavirus disease 2019.
9 8 8
7
4 4
3 3 3 2
1
0 0
-4 -4
-7-8
-5
-2
1
4
7
10
Brazil
Russia
Japan
Germany
US
SouthKorea
Europe
UK
France
Switzerland
Indonesia
China
Taiwan
India
Singapore
HongKong
Returns(%)
Returns Performance - May 2020
3. 3
India – Sectoral Indices Performance
• Telecom continued its
outperformance relative to
other sectors
• Auto posted strong gains
due to relaxation in
economic activity
• Financials witnessed a
sell-off due to limited focus
in the stimulus package
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 April 30, 2020 – May 31, 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). MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit http://www.icraonline.com/legal/standard-disclaimer.html. COVID-19 is Coronavirus disease
2019.
12
6
4
2 1 1 1
0 0 -1 -1
-2 -3
-8
-10 -10-12
-8
-4
0
4
8
12
16
Telecom
Auto
BasicMat.
HC
CG
Metal
FMCG
Energy
Infra
IT
Power
Oil&Gas
Realty
CD
Finance
Bankex
Returns(%)
Returns Performance - May 2020
4. 4
A ‘Ripe’ Time To Sow The Seeds Of
‘Wealth Creation’
OUR EQUITY OUTLOOK
6. 6
CAUSE OF CRISIS – ENDOGENOUS VS. EXOGENOUS
Endogenous Shock
When a financial crisis/recession is caused
due to factors intrinsic to an economy – like
economic or financial imbalances it is called
an Endogenous Shock
Exogenous Shock
When a financial crisis/recession is caused
due to factors that originate outside the ambit
of any country’s economic or financial factors,
it is called an Exogenous Shock
This time its different…
7. 7
CAUSE OF CRISIS – PAST VS. CURRENT
Source: MFI. Data as of March 31 2020. Past performance may or may not sustain in future. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit
http://www.icraonline.com/legal/standard-disclaimer.html.
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
S&P BSE Sensex
Lehman Crisis
(Endogenous)
European Crisis
(Endogenous)
Taper Tantrum
(Endogenous)
Post China Yuan
devaluation
(Endogenous)
NBFC Crisis
(Endogenous)
COVID-19
(Exogenous)
This time its different…
8. 8
FINANCIAL CRISIS IN THE PAST –
CAUSED BY UNSTABLE MACROS (ENDOGENOUS CAUSE)
CURRENT FINANCIAL CRISIS –
MACROS RELATIVELY STABLE (EXOGENOUS CAUSE)
140
126
114
40
60
80
100
120
140
May-08
May-09
May-10
May-11
May-12
May-13
May-14
Crude oil (USD/bl)
Lehman
Crisis
US Taper
Tantrum
European
Crisis
58
51
23 25
35
20
30
40
50
60
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Crude oil (USD/bl)
Source: Edelweiss Research. Data as of May 31 2020. Past performance may or may not sustain in future
This time its different…
9. 9
Source: Edelweiss Research. Data as of March 31 2020. CPI Inflation data around financial crisis in the past has been considered i.e. from May-08 to May-14 and current data as of March 2020 is considered. The data for April
2020 has been delayed due to COVID-19 led economy shutdown. Past performance may or may not sustain in future
10.4
9.4 10.1
11.5
4.0
8.0
12.0
16.0
May-08
May-09
May-10
May-11
May-12
May-13
May-14
CPI Inflation (%)
Lehman
Crisis
European
Crisis
US Taper
Tantrum
7.4
7.6
6.6
5.8
5.0
5.5
6.0
6.5
7.0
7.5
Dec-19
Jan-20
Feb-20
Mar-20
CPI Inflation (%)
FINANCIAL CRISIS IN THE PAST –
CAUSED BY UNSTABLE MACROS (ENDOGENOUS CAUSE)
CURRENT FINANCIAL CRISIS –
MACROS RELATIVELY STABLE (EXOGENOUS CAUSE)
This time its different…
10. 10
Source: Edelweiss Research. Data as of March 31 2020. Past performance may or may not sustain in future
103
98
45
65
85
105
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Indian Market Cap to GDP (%)
Pre-Lehman
Crisis Pre-European
Crisis
76
55
67 65
50
55
60
65
70
75
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Indian Market Cap to GDP (%)
Pre-COVID
This time its different…
FINANCIAL CRISIS IN THE PAST –
CAUSED BY UNSTABLE MACROS (ENDOGENOUS CAUSE)
CURRENT FINANCIAL CRISIS –
MACROS RELATIVELY STABLE (EXOGENOUS CAUSE)
11. 11
Source: Morgan Stanley. Data as of May 31, 2020. Countries considered include United States of America, Japan, United Kingdom, Euro Area. GFC – Global Financial Crisis, GDP – Gross Domestic Product. Past performance may or may not
sustain in future
Policy response across countries has been swift and substantial in the current COVID led crisis than GFC (2008 crisis)
3
6
9
12
15
18
21
24
27
30
2007 2009 2011 2013 2015 2017 2019 2021
Select Central Bank Balance Sheet (USD tn)
Change in B/S
$2.6 trillion
7.9% of GDP
~$11.5 trillion
28% of GDP (estimated)
E
This time its different…
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
May-08 May-10 May-12 May-14 May-16 May-18 May-20
Change in Central Banks Balance Sheets
(% of GDP, 12M change)
US EA Japan UK G4
Based on announcements so far, we
estimate that the balance sheet of
select countries is expected to expand
by 28% of GDP by year-end 2021.
13. 13
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
14. 14
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 would 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)
15. 15
Healthy Forex Reserves
Source: RBI. Data as of May 22, 2020. Forex – Foreign Exchange Reserves
India’s foreign exchange reserves have increased substantially.
The reserves are sufficient to cover 12 months of imports
419 422 428 430 429 434
443
451
457
471
482
476 479
490
380
400
420
440
460
480
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
India Forex Reserves (USD Bn)
16. 16
Current Account Deficit approaching Surplus
Source: RBI, Estimates are of SBI, Barclays. Data as of Dec 2019. FY21E is estimates for FY 21
India’s Current Account Deficit has narrowed to 0.2% in Q3FY20. The same is expected to turn into surplus in FY21
-2.1
-1.84
-2.3
-2.9 -2.7
-0.7
-2.0
-0.9
-0.2
0.7
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
Dec-17
Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Dec-19
FY21E
India's Current Account Balance (% of GDP)
18. 18
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
19. 19
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
20. 20
Sectoral Leadership changes 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 33.3%
IT 14.7%
OIL & GAS 14.3%
CONSUMER GOODS 13.4%
AUTOMOBILE 5.5%
Data as of May 31, 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
21. 21
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 May 31,
2020
Share in the Overall Market Cap (%)
Index 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Feb-20 Mar-20 Apr-20 May-20
Top-
100
79 75 74 71 79 77 78 79 78 81 75 74 72 65 70 73.2 76.0 75.3 75.4
101-
250
11 12 12 13 11 12 13 13 14 13 14 15 15 16 16 16.2 15.2 15.1 15.1
Above
250
11 13 14 16 10 11 9 8 8 6 10 11 14 18 14 10.5 8.7 9.5 9.4
The recent correction in Smallcap space has led to Marketcap divergence in terms of valuations
22. 22
• ‘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 – Aim to invest in
potential future leaders through high conviction ideas
23. 23
Value Investing through
ICICI Prudential Value Discovery Fund
PORTFOLIO POSITIONING
Top 10 Sector Holdings % to NAV
Software 16.9%
Pharmaceuticals 13.2%
Auto 9.9%
Power 7.5%
Telecom - Services 7.1%
Auto Ancillaries 5.2%
Pesticides 4.5%
Consumer Non Durables 4.1%
Transportation 4.0%
Finance 3.6%
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 May 31, 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. 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.
24. 24
ICICI Prudential Focused Equity Fund –
Focused on future potential leaders
Data as of May 31, 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. The asset allocation and investment strategy will be as per Scheme Information Document.
PORTFOLIO POSITIONING
Top 10 Sector Holdings % to NAV
Software 15.8%
Pharmaceuticals 9.1%
Telecom - Services 8.9%
Power 7.7%
Auto 7.1%
Consumer Non Durables 6.1%
Auto Ancillaries 5.4%
Gas 4.8%
Banks 4.8%
Finance 4.6%
• Software
• Power
• Telecom
• Auto Ancillaries
• Metals & Mining
Overweight
Sectors
Underweight
Sectors
• Retailing
• Oil, Gas & Petroleum Products
• Industrial Products & Capital
Goods
• Consumer Non Durables
• Banks & Finance
Overweight / Underweight sectors relative to the
benchmark i.e. S&P BSE 500 Index
25. 25
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
26. 26
ICICI Prudential Smallcap Fund
Solid research &
screening process
Well Defined
Investment Strategy
& Portfolio Construct
Young and Agile:
AUM as on May 31, 2020
is Rs. 970.99 Crs
Solid Investment
Process
The asset allocation and investment strategy of the scheme will be as per the Scheme Information Document
27. 27
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.
28. 28
ICICI Prudential Balanced Advantage Fund –
Equity Allocation Journey Vs. Market movement
Source: BSE India & MFI, Data as of May 31, 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 32424
78 71
30
40
50
60
70
80
15000
20000
25000
30000
35000
40000
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Apr-15
Apr-16
Apr-17
Apr-18
May-19
ICICIPrudentialBalancedAdvantageFund
NetEquityExposure(%)
S&PBSESensexLevels
S&P BSE Sensex Levels vis-a-vis ICICI Prudential BAF Net Equity Exposure (%)
S&P BSE Sensex Net Equity Exposure %
May-20
29. 29
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.
30. 30
Our Equity Outlook
• Historically, financial crisis have generally occurred due to endogenous factors – economic imbalances like high crude prices, high
inflation, etc. This time it is different since macros being stable, the current crisis is the result of an external factor i.e. COVID-19
• 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, 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
32. 32
India Macros Strong
Fiscal Year Ends FY13 FY14 FY15 FY16 FY17 FY18 FY19 Latest*
Inflation (CPI%) 10.2 9.5 5.9 4.9 3.8 3.6 3.4 5.8
Current Account (% of GDP) -4.8 -1.7 -1.3 -1.1 -0.6 -1.9 -2.4 -0.2
Fiscal Deficit (% of GDP) 4.9 4.5 4.1 3.9 3.5 3.5 3.4 4.6
Crude Oil (USD/barrel) 109 107 53 39 60 58 65 35
GDP Growth (%) 5.6 6.6 7.2 7.9 7.9 7.3 6.1 4.2
Forex Reserves (USD bn) 292 304 342 356 370 424 413 490
Currency (USD/INR) 54 60 63 66 65 65 70 75.6
Source: CRISIL Research, RBI, CCIL India, CMIE, Data as on 31-May-2020; FY refers to fiscal year ends Apr - Mar; *Inflation (CPI) is for the month of Mar-20, Currency, Forex Reserves as on April 24, 2020, Current
Account Deficit data & GDP Data is for FY20, Fiscal Deficit data is as of FY20.
33. 33
Financial Crisis and Central Banks
Whenever the market is hit by a crisis, Central Banks generally have an identical modus operandi
Step 3
Step 2
Step 1
Flush the system
with liquidity
Improve Risk Capital
in the system
Reviving growth
We believe we are in the end of Step 1 and entering Step 2, let us look at this in detail
34. 34
Step 1 : Flush the system with liquidity
The RBI has ensured abundant liquidity in the system. But the risk capital needs to improve so that the money
multiplier effect picks up resulting in economic activity
(6,500.0)
(5,500.0)
(4,500.0)
(3,500.0)
(2,500.0)
(1,500.0)
(500.0)
500.0
1,500.0
May-19
Jul-19
Sep-19
Nov-19
Jan-20
Mar-20
May-20
Total Liquidity in the system (INR Bn)
Deficit
Surplus
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
May-19
Jul-19
Sep-19
Nov-19
Jan-20
Mar-20
May-20
Banks lending to RBI under reverse repo (INR Bln)
Data as of May 2020, Source: RBI, Morgan Stanley, RBI – Reserve Bank of India
35. 35
Step 2 : Improve Risk Capital in the System
TLTRO – Targeted Long Term Repo Operation, NBFC – Non Banking Financial Company, HFC – Housing Finance Company, RBI - Reserve Bank of India
We believe, this is an important step and the background is set for RBI to enter Step 2 where the
focus would be to improve the risk capital. Lets look at steps taken and expected by RBI:
Steps Taken:
• TLTRO windows to address the
dislocated corporate bonds
• TLTRO 2.0 to encourage banks to fund
stressed sector (NBFC/ HFC)
• Cutting Reverse Repo Rates
aggressively compared to Repo rate
Steps Expected:
• Putting a cap on the reverse repo
transaction
• Aggressive Open Market Operations
• RBI buying bonds directly from government
• Increase in HTM (Hold to Maturity) limit of
bonds for banks
36. 36
Step 3 : Reviving Growth
This phase starts, when the interest rates bottom out and the regime of low interest rates prevails for sometime. The risk
capital increases and the credit growth starts to pick up resulting in improvement in the economic activity
Credit growth continues to
lag the deposit growth,
highlighting that the
economic activity is muted
due to COVID-19 conditions
Data Source: RBI, Data as of May 31, 2020
50%
80%
110%
140%
Jan-19
Mar-19
May-19
Jul-19
Sep-19
Nov-19
Jan-20
Mar-20
May-20
Incremental Credit to Deposit Ratio
37. 37
Measures taken by the RBI to improve
liquidity & risk capital
Measures announced in response to COVID 19 Date of announcement INR Tn.
LTRO 6th Feb and 16th March (2 tranches of INR 1 tn each) 2
Sell/buy swap 12th March and 16th March (2 tranches of INR150bn each) 0.3
OMO purchases 20th March, 24th March and 26th March 0.4
LTRO, CRR cut and MSF related liquidity 27th March 3.7
TLTRO 2.0 17th April 0.5
Special refinancing scheme for SIDBI, NABARD and
NHB
17th April 0.5
Liquidity window for mutual funds (SLF-MF) 27th April 0.5
Other RBI measures 0.1
Total Support 8
TLTRO – Targeted long-term repo operation, RBI – Reserve Bank of India, OMO – Open Market Operation, CRR – Cash Reserve Ratio, SLF-MF – Standing Liquidity Facility-Mutual Fund. Source: Deutsche Research. Data as of May 30, 2020
38. 38
But risk aversion continues
The risk aversion is still high in the system, which is hampering the transmission of rates
-4
-3
-2
-1
0
1
2
3
4
5
3
4
5
6
7
8
9
10
May-12
Nov-12
May-13
Nov-13
May-14
Nov-14
May-15
Nov-15
May-16
Nov-16
May-17
Nov-17
May-18
Nov-18
May-19
Nov-19
May-20
10YrGsec-3MonthTBillSpread(%)
Repo&ReverseRepoRate(%)
Risk aversion high – Spread between 10-Y G-Sec &
3M T-Bill
Repo Rate Reverse Repo 10 Year Gsec - 3 Mnth T Bill
0.4
1.0
0.8
1.9
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Outstanding
Loan Book Yield
Fresh Loan
Book Yield
Outstanding
Term Deposit
Repo Rate Cut
Transmission of Rates in % (Mar -19 to Mar-20)
Data Source: Morgan Stanley and Deutsche Bank Research. Data as of May 31, 2020
39. 39
Yield Curve still continues to remain steep
Slope is steeper in the 1-5
Yr segment, so Short &
Medium Term Schemes
which invest in this part of
yield curve are currently
providing good investment
opportunities
Data Source: Morgan Stanley. Data as of May 31, 2020
6.04
6.78
3.0
4.0
5.0
6.0
7.0
8.0
1 M 3 M 6 M 1 Year 2 Years 3 Years 5 Years 10 Years
Yield Curve – Corporate Bond and Gsec (%)
Gsec Curve Corporate Bond Curve
40. 40
Spread Assets continue to remain attractive
3.5
4.5
5.5
6.5
6 Months 1 Yr 3 Yr 5 Yr
Yields(%)
Repo AAA AA
Avg
99 bps
Avg
151 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 May 31, 2020
41. 41
G-Sec & Repo Rate Spread Attractive
Spread between G-Sec and
Repo Rate are at elevated
levels. RBI expected to maintain
accommodative stance, We
believe above stated factors
make a good case for tactical
investment in Gsec
Data Source: RBI. Data as of May 31, 2020
42. 42
Yields have cooled-off from the highs
seen in April end
0.0
0.4
0.8
1.2
1.6
2.0
4
5
6
7
8
1MCP
3MCP
6MCP
1YearAAA
3YearAAA
5YearAAA
10YearAAA
DropinYields(%)
24-Apr-20&29-May-20Yields(%)
AAA Yield movement (%)
Drop in Yields (%) 24-Apr-20 29-May-20
0.0
0.2
0.4
0.6
0.8
1.0
1.2
5
6
7
8
9
1YearAA
3YearAA
5YearAA
10YearAA
DropinYields(%)
24-Apr-20&29-May-20Yields(%)
AA Yield movement (%)
Drop in Yields (%) 24-Apr-20 29-May-20
Various RBI & Govt. measures helped in bringing down the rates and we expect further moderation in yields
Data Source: CRISIL Research. Data as of May 31, 2020
43. 43
RBI to maintain accommodative stance
2.5
3.1
3.5
5.8
6.7
5.4
4.7
2.8
5.2
4.3 4.1
3.6
4.1
3.6
3.3 3.3
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
Inflation (%)
YoY Inflation YoY Core Inflation
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 y-o-y (%)
We expect growth and inflation to come down, which may provide further headroom to RBI to cut rates
Data Source: Morgan Stanley (MS) , for Growth and Inflation MS estimates are taken for Calendar Year, Data as of May 31, 2020
44. 44
Fixed Income Outlook
• We expect growth and inflation to come down, which may provide 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 should keep G-Sec yields in check
• Keeping the above points in mind, we are bullish on duration and 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.
45. 45
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
46. 46
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
47. 47
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.
48. 48
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
49. 49
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
50. 50
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
51. 51
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
52. 52
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
53. 53
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
54. 54
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
55. 55
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
56. 56
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
57. 57
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.