In the second bi-monthly monetary policy statement for 2019-20, the RBI reduced the repo rate by 25 basis points to 5.75% in response to low inflation and growth concerns. Projections for inflation were adjusted slightly upward, and GDP growth estimates were lowered. The report emphasizes an accommodative policy stance to boost aggregate demand and private investment, alongside various liquidity-improving measures.

1. Impact Analysis
Second Bi-monthly Monetary Policy Statement, 2019-20
What is RBI’s Stance?
RBI policy highlights:
• RBI reduced the Repo rate by 25 basis points to 5.75%
• Reverse Repo rate stands adjusted to 5.50%
• Marginal Standing Facility (MSF) rate and the Bank rate stands
adjusted to 6.00%
• Cash Reserve Ratio (CRR) remains unchanged at 4%
• Statutory Liquidity Ratio (SLR) stands adjusted to19.00%
Inflation highlights:
• CPI inflation, ex food and fuel, fell sharply from 5.1% in March 2019,
the largest monthly decline since April 2017, to 4.5% in April 2019,
largely due to broad-based moderation in inflation in items excluding
food and fuel
• Owing to increase in food and fuel inflation, retail inflation remained
unchanged in April 2019, at its March 2019 level of 2.9%
• Housing inflation was the lowest since June 2017, reflecting
softening in house rents in urban areas
Domestic Economy
• Global growth slowed down since the last MPC
meeting in Advanced Economies (AE's) as well as in
major Emerging Market Economies (EMEs)
• Equity markets in the AE’s witnessed some selling
pressure since early May 2019, triggered by USA trade
tensions with China and recently, with Mexico. Even in
EME, equity markets lost steam due to the waning risk
appetite on rising geo-political uncertainties and
weakening global trade prospects
• Yields in AE’s and in most EMEs fixed income markets
eased as central banks signalled softer stances with
an aim to boost economic growth
• US dollar strengthened against most EME currencies
on better than expected domestic economic data for
Q1
• Crude oil prices remained volatile reflecting evolving
demand-supply conditions
Global Economy
Accommodative
RBI’s
Inflation
Target
Data Source: RBI Second Bi-Monthly Monetary Policy Statement 2019-20 dated June 6, 2019, RBI Statement on Developmental and
Regulatory Policies dated June 6, 2019
• Real gross domestic product (GDP) growth is placed at
6.80% by National Statistical Office (NSO), down by 20
basis points from the second advance estimates (FAE)
for 2018-19 release
• Trade deficit widened, both sequentially and on a year-
on-year basis in April 2019
• India Meteorological Department (IMD) has predicted
south-west monsoon rainfall (June to September) to be
normal at 96%
• The purchasing managers index (PMI) for May 2019
remained in expansion on the back of increased output,
new orders and employment
• RBI conducted two Open Market Operations (OMO) and
a US dollar buy/sell swap auction in the month of April
2019 and May 2019 to inject durable liquidity into the
system
3.5
4.5
5.5
6.5
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
RBI Policy Rates Trend- Last 1 year
Repo Rate CRR Reverse Repo
0
2
4
6
8
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
CPI Inflation (MoM %)

2. The Reserve Bank of India (RBI) cut policy rates by 25bps to 5.75%, in line with market consensus. This is the third consecutive rate
cut of CY2019 resulting in a cumulative 75bps of cuts so far
The RBI’s Monetary Policy Committee (MPC) decision to lower rates was brought on by in line continued low CPI inflation (2.46%
averaging Jan-April 2019), and due to concerns around slowdown in growth, investment activity and consumption
RBI has slightly revised its inflation projections for 1HFY20 to 3.0-3.1% from 2.9-3.0% earlier and estimated 2HFY20 inflation to be at
3.4-3.7%
Growth projection was also reduced to 7.0% from 7.2% earlier while 1HFY20 projections were brought down to 6.4-6.7% from 6.8-
7.1% earlier. Projections for 2HFY20 stand at 7.2-7.5%
Our View
• The tone of the policy was more accommodative considering scope to improve on growth concerns by supporting efforts to boost
aggregate demand, and in particular, revive private investment activity, while remaining consistent with RBI’s flexible inflation
targeting mandate
• We believe the further action by MPC would be data-dependent as the RBI may want to see certain risks play out such as the
uncertainty in oil prices, probability of El Nino effects in 2019 and the Budget to be presented by the newly elected government
• RBI's balancing act between a rate cut delivery and subsequently transmission of the same to the real economy will be an
important aspect to look out for
• We expect liquidity to improve due to the following factors: 1. RBI using various liquidity improving tools 2. Government engaging
in post-budget discretionary spending 3. Government reducing its cash balances with RBI 4. June- September seasonally being
less stressful for system liquidity. Improvement in liquidity conditions in the coming months would be positive for the shorter end
of the yield curve
• We continue to remain sanguine towards the short end of the yield curve and on spread assets. We believe that the risk-reward
benefit is still favourable in the 1-4 Year segment of the yield curve and spread assets provide better margin of safety.
• However, we may tactically alter duration based on the spread opportunity available in different market segment.
Our Analysis & Outlook
Scheme Recommendations
Cash Management
Solutions
ICICI Prudential Savings Fund
ICICI Prudential Floating Interest Fund
ICICI Prudential Ultra Short Term Fund
These schemes may
benefit from better risk
adjusted returns
Short Duration
Schemes
ICICI Prudential Short Term Fund
ICICI Prudential Banking & PSU Debt Fund
ICICI Prudential Corporate Bond Fund
These schemes may
benefit from mitigating
interest rate volatility
Accrual Schemes ICICI Prudential Credit Risk Fund
ICICI Prudential Medium Term Bond Fund
These schemes may
benefit from capturing
yields at elevated levels
Dynamic Duration
Scheme
ICICI Prudential All Seasons Bond Fund This scheme may benefit
from volatility by actively
managing duration
Impact Analysis

3. Disclaimer
Scheme Risk-o-meters
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
None of the aforesaid recommendations are based on any assumptions. These are purely for reference and the investors are requested to consult
their financial advisors before investing. All data/information used in the preparation of this material is specific to a time and may or may not be
relevant in future post issuance of this material. ICICI Prudential Asset Management Company Limited (the AMC) takes no responsibility of
updating any data/information in this material from time to time. The AMC (including its affiliates), ICICI Prudential Mutual Fund (the Fund), ICICI
Prudential Trust Limited (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. Nothing contained in this document shall be construed to be an investment advice or an assurance of the benefits of
investing in the any of the Schemes of the Fund. Sectors/stocks mentioned in the article do not constitute any recommendation and the Fund
through its schemes may or may not have any future position in these sectors/stocks. Recipient alone shall be fully responsible for any decision
taken on the basis of this document.
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) 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
ICICI Prudential Credit Risk Fund (An open ended debt scheme predominantly investing in AA and
below rated corporate bonds) 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
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) 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
ICICI Prudential All Seasons Bond Fund (An open ended dynamic debt scheme investing across duration) is
suitable for investors who are seeking*:
 All duration savings
 A debt scheme that invests in debt and money market instruments with a view to maximize income
while maintaining optimum balance of yield, safety and liquidity
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) 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
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)
is suitable for investors who are seeking*
 Short term savings
 An open ended debt scheme predominantly investing in floating rate instruments
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) 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
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.) 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
ICICI Prudential Corporate Bond Fund (An open ended debt scheme predominantly investing in AA+ and above
rated corporate bonds.) is suitable for investors who are seeking*
 Short term savings
 An open ended debt scheme predominantly investing in highest rated corporate bonds.
Impact Analysis
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
Note: The Macaulay duration is the weighted average term to maturity of the cash flows from a bond. The weight of each cash flow is determined by
dividing the present value of the cash flow by the price.