Shifting Gears : RBI steadyfastly moved to address higher inflation by hiking repo rate by 40bp. Read the document for more information

1. Highlights of the Off-Cycle MPC meeting
• The Reserve Bank of India decided to hold an off-cycle meeting to reassess the evolving inflation-growth dynamics and the impact
of the developments after the MPC meeting of April 6-8, 2022.
• With a view to achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per
cent, while supporting growth, the Monetary Policy Committee decided to increase the policy repo rate by 40 basis points to 4.40%
with immediate effect.
• Given the narrowed liquidity corridor of 50 bps, Standing Deposit Facility rate has moved to 4.15% and the Marginal Standing
Facility and Bank Rate has moved to 4.65%.
• In its efforts to absorb excess liquidity in a gradual manner, the MPC has decided to hike the CRR to 4.50%, effective from May 21,
2022. The increase in CRR is expected to absorb around Rs.87,000 crore of excess liquidity from the system, according to the RBI.
Data Source: RBI Monetary Policy Statement 2022-23 dated May 05, 2022, Data Source for Cash Reserve Ratio (CRR): RBI
SHIFTING GEARS
Expectations for the upcoming policy
• We expect the RBI to intensify its battle against high inflation while putting growth on the back-burner.
• We expect series of repo rate hikes in the upcoming meetings.
• We expect withdrawal of surplus liquidity from the system and hiking CRR is a strong step towards it.
In our recent communication titled “Tide is Turning”, we highlighted the change in the RBI’s
commentary and anticipated a repo rate hike. As expected, the RBI has steadfastly moved to
address the higher inflation challenge through a surprise MPC meet on May 2 and May 4, 2022.
Impact on Fixed-Income Markets
• The hike in the policy rate is expected to push overall yields up. Yields on the 10-year 6.54% G-Sec maturing in 2032 have already
jumped close to 7.4% post announcement, from ~7.10% on the previous day. Meanwhile, the target overnight call money rate has
also crossed 4% in response to the rate hikes.
• We expect longer-end to remain volatile, but more protective compared to shorter-end. The burden of the impact will be more
visible in the extreme short end of the yield curve.
• We expect a faster transmission of rate hikes to borrowers given the increased lending in repo-rate-linked loans.
Our Recommendations
Monetary Policy Statement, 2022-23
• We believe floating-rate bonds (FRBs) has the ability to outperform all other fixed-rate instruments due to rising-rate environment
and hence recommend investing in schemes which takes exposure in FRBs like ICICI Prudential Floating Interest Fund and ICICI
Prudential Savings Fund.
• We recommend investing in spread assets with an aim to benefit from higher carry.

2. Positioning our Scheme Portfolios to Reduce the Impact of Volatility
1. Higher allocation to Floating Rate Bonds
2. Actively Managing Duration
Scheme Name
(A) (B) (C)
Change in Mod
Duration (C-B)
Mod Duration
in Yrs (Oct
31,2021)
Mod Duration
in Yrs (Mar
31,2022)
Mod Duration
in Yrs (Apr 30,
2022)
ICICI Prudential Liquid Fund 0.1 0.1 0.1 0.0
ICICI Prudential Money Market Fund 0.2 0.5 0.4 -0.1
ICICI Prudential Ultra Short Term Fund 0.2 0.3 0.3 0.0
ICICI Prudential Savings Fund 0.8 1.1 0.9 -0.2
ICICI Prudential Floating Interest Fund 1.6 1.3 0.9 -0.4
ICICI Prudential Credit Risk Fund 1.6 1.7 1.6 -0.1
ICICI Prudential Short Term Fund 1.6 1.5 1.8 0.3
ICICI Prudential Corporate Bond Fund 2.7 1.4 1.2 -0.2
ICICI Prudential Banking & PSU Debt Fund 3.9 2.2 2.1 -0.1
ICICI Prudential Medium Term Bond Fund 2.5 2.2 2.4 0.2
ICICI Prudential Bond Fund 4.2 2.8 3.1 0.3
ICICI Prudential All Seasons Bond Fund 2.3 2.3 2.8 0.5
ICICI Prudential Long Term Bond Fund 8.3 6.9 6.9 0.0
ICICI Prudential Gilt Fund 7.0 2.4 1.8 -0.6
Scheme Name
Exposure to Floating Rate Instruments
(Apr 30, 2022)
ICICI Prudential Floating Interest Fund 75.6%
ICICI Prudential Gilt Fund 66.1%
ICICI Prudential Savings Fund 60.1%
ICICI Prudential Corporate Bond Fund 45.9%
ICICI Prudential Short Term Fund 40.0%
ICICI Prudential Banking & PSU Debt Fund 32.4%
ICICI Prudential All Seasons Bond Fund 30.4%
ICICI Prudential Bond Fund 15.1%
ICICI Prudential Medium Term Bond Fund 8.5%
ICICI Prudential Credit Risk Fund 8.2%
ICICI Prudential Floating Interest Fund 75.6%
ICICI Prudential Gilt Fund 66.1%
ICICI Prudential Savings Fund 60.1%
SHIFTING GEARS
Monetary Policy Statement, 2022-23

3. SHIFTING GEARS
Monetary Policy Statement, 2022-23
As per SEBI Circular dated, June 07, 2021; the potential risk class (PRC) matrix based
on interest rate risk and credit risk
SR
No.
Scheme Name Position in the Matrix
1 ICICI Prudential Overnight Fund
2 ICICI Prudential Savings Fund
3 ICICI Prudential Floating Interest Fund
4 ICICI Prudential Medium Term Bond Fund
5 ICICI Prudential All Seasons Bond Fund
6 ICICI Prudential Corporate Bond Fund
7 ICICI Prudential Banking & PSU Debt Fund
8 ICICI Prudential Short Term Fund
9 ICICI Prudential Bond Fund
10 ICICI Prudential Liquid Fund
11 ICICI Prudential Money Market Fund
12 ICICI Prudential Long Term Bond Fund
13 ICICI Prudential Gilt Fund
14 ICICI Prudential Constant Maturity Gilt Fund
15
ICICI Prudential Credit Risk Fund
16 ICICI Prudential Ultra Short Term Fund

4. SHIFTING GEARS
Monetary Policy Statement, 2022-23
Riskometer and Disclaimers as on March 31, 2022
Please note that the Risk-o-meter(s) specified above will be evaluated and updated on a monthly basis. Please refer to
https://www.icicipruamc.com/news-and-updates/all-news for more details.
Macaulay Duration : The Macaulay duration is the weighted average term to maturity of the cash flows from a bond. The weight of each cash flow is
determined by dividing the present value of the cash flow by the price. Modified duration is a formula that expresses the measurable change in the
value of a security in response to a change in interest rates.

5. SHIFTING GEARS
Monetary Policy Statement, 2022-23
Riskometer and Disclaimers as on March 31, 2022
Please note that the Risk-o-meter(s) specified above will be evaluated and updated on a monthly basis. Please refer to
https://www.icicipruamc.com/news-and-updates/all-news for more details.
Macaulay Duration : The Macaulay duration is the weighted average term to maturity of the cash flows from a bond. The weight of each cash
flow is determined by dividing the present value of the cash flow by the price. Modified duration is a formula that expresses the measurable
change in the value of a security in response to a change in interest rates.

6. SHIFTING GEARS
Monetary Policy Statement, 2022-23
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
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