Government’s release of Rs 86.55 billion to certain banks for preferential allotment of shares, hopes of more reform measures by the government in the upcoming Budget, and sustained inflows from the foreign institutional investors (FIIs) augured well for the local indices. Read the full document to know more.

1. January 2020
Global Markets Dec -19
(%)
Current
PE
10 Yr
Average
US 1.7 19.6 15.7
UK 2.7 18.2 17.5
Japan 1.6 18.8 19.8
Hong Kong 7.0 11.2 10.9
Singapore 0.9 12.2 12.3
China 8.4 9.0 8.6
Domestic Markets Dec -19
(%)
Current
PE
10 Yr
Average
S&P BSE Sensex 1.1 26.5 20.1
NSE Nifty 0.9 26.7 20.3
S&P BSE Auto 2.1 NA 18.5
S&P BSE Bankex 1.3 34.6 16.8
S&P BSE Capital Goods (2.5) 23.4 28.7
S&P BSE Consumer
Durables 0.6 45.3 30.0
S&P BSE FMCG (2.7) 32.5 39.2
S&P BSE Healthcare (1.3) 26.3 28.4
S&P BSE IT 4.0 19.7 19.7
S&P BSE Metals 6.6 8.8 12.4
S&P BSE Mid Cap (0.8) 31.3 23.1
S&P BSE Oil & Gas (2.7) 11.6 12.2
S&P BSE PSU (1.7) 12.7 13.5
S&P BSE Realty 5.3 28.3 24.1
US Economy: The US Federal Reserve (Fed) kept interest rates
unchanged at 1.5-1.75% and signaled keeping them steady
through 2020. Meanwhile, the US gross domestic product (GDP)
advanced 2.1% on-year in the third quarter (Q3) of 2019
compared with 2% growth in Q2 2019.
Eurozone: The European Central Bank (ECB) kept its main
refinancing rate unchanged at a record low 0%, the deposit rate
at -0.50% and the marginal lending rate at 0.25% under its newly
appointed president, Christine Lagarde. In her first press
conference, Lagarde stated the central bank would continue with
the “highly accommodative” monetary policy to boost inflation.
UK: The Bank of England (BoE) kept its interest rate unchanged
at 0.75% in a split vote as two members sought a 25 basis point
rate cut. The UK economy stagnated in October, marking three
straight months without growth for the first time since 2009.
Japan: Japan's cabinet has approved a $122 billion fiscal
package to support stalling growth. the Bank of Japan (BoJ)
policy board voted 7-2 to retain the interest rate at -0.1% on
current accounts. The economy grew at an annualized rate of
1.8% in the in the third quarter compared to 2.0% growth in the
second quarter.
Index Performance: Indian equity indices ended 2019 on a
positive note with benchmarks S&P BSE Sensex and Nifty 50
rose 1.13% and 0.93%, respectively in December 2019.
Inflation: Retail inflation based on the consumer price index
(CPI) breached the Reserve Bank of India’s (RBI) medium-term
target of 4% for the second consecutive month this fiscal,
surging to a 40-month high of 5.54% in November 2019 owing
to rising food prices.
Domestic Developments:
Tailwinds: Government’s release of Rs 86.55 billion to certain
banks for preferential allotment of shares, hopes of more reform
measures by the government in the upcoming Budget, and
sustained inflows from the foreign institutional investors (FIIs)
augured well for the local indices.
Headwinds:
 Reserve Bank of India (RBI) unexpectedly kept the repo rate
unchanged at 5.15% and lowered the gross domestic product
(GDP) forecast to 5% for fiscal 2020.
 The sentiment was dented further after the global agencies,
such as Moody's Investors Service and Fitch Ratings, cut
India’s GDP growth projection for fiscal 2020.
EQUITY UPDATE
Data Source: Crisil Research; * Data till Dec 31, 2019;
Data Source: Crisil Research; * Data till Dec 31, 2019, PE- Price to
Earnings
Indian Market Update
Global Market Update

2. Indian Market Update
Earnings Growth
(%)
FY19 FY20E FY21E
Sensex 14.5 22.7 26.9
Macro Indicators Latest
Update
Previous
Update
GDP (YoY%) 4.5%
(2QFY20)
5%
(1QFY20)
IIP (YoY%) -3.8% (Oct) -4.3% (Sep)
Crude ($ bbl) 66.00 (Dec 31) 62.43 (Nov 30)
Core Sector Growth
(YoY%)
-1.5
(Nov 2019)
-5.8
(Oct 2019)
Trade Deficit ($ mn) -12,120
(Nov 2019)
-11,010
(Oct 2019)
Current Account
Deficit ($ bn)
-6.3
(2QFY20)
-14.3
(1QFY20)
FII Holding in Indian
Equities (%)#
22.0
(2QFY20)
22.5
(1QFY20)
Flows Dec -19 Nov -19 Oct-19
FIIs (Net Purchases
/ Sales) (Rs cr)
7,338 25,231 12,368
MFs (Net Purchases
/ Sales) (Rs cr)
-2,746 -4,822 5,181
Note: # FII hldg includes ADR/GDR (BSE500 Index); Data Source: Crisil Research; * Data till Dec 31, 2019; CAD: Current Account Deficit; GDP: Gross
Domestic Product, IIP: India Industrial Production FII: Foreign Institutional Investors; MF-Mutual Fund; E- Estimate
Outlook & Triggers
2019 was a year where we saw economy slowing down significantly. However, the same was not reflected in the Equity
Market performance which posted robust gains of 14% (S&P BSE Sensex Index). Compared to the other markets in 2019,
India (MSCI India Index) underperformed its Emerging Market (EM) peers (MSCI EM Index). The outperformance of
Emerging Markets can be attributed to the synchronized easing stance adopted by various global central banks which
helped in increasing the overall risk capital. In 2019, we also saw many of the longer sovereign yields drifting towards the
negative territory, which raised lot of questions around slowdown and recession. In India, largecaps outperformed mid and
smallcaps in 2019. In terms of sector performance, Energy and Financials remained in favour and were among the top
performing sectors in 2019.
On the sentiments side, Foreign Portfolio Investors (FPIs) came back strongly in 2019 and exceeded the contribution from
Domestic Institutional Investors (DIIs). Flows into equity markets from the domestic mutual funds were the slowest in the
last five year but SIP flows continued to accelerate.
Going into 2020, we believe that the valuation seems to be fully priced-in; having said that, a substantial divergence exists
currently between Value and growth stocks with Growth stocks trading at a high premium compared to Value stocks.
Hence, we believe 2020 would be a year to play the Value or Special Situations theme which aim to capitalize from such
divergence.
As highlighted earlier, due to the continued outperformance of largecaps and due to the deep correction in the smallcap
space, we are witnessing divergence in the Market capitalization space. Adding to this, our in-house models based on
Marketcap Earnings yield and Marketcap share have decisively turned more positive on the smallcap space. Hence, we are
turning positive on Smallcap and Multicap space over Largecaps.
Global and Domestic factors like US elections, US-China Trade deal, Upcoming Budget, pace of government reforms,
contagion effect of credit concern etc. are few factors which may keep the market volatile in 2020. Hence, we continue to
recommend investors to invest in Dynamic Asset Allocation Schemes which can benefit from volatility.
 A spike in the domestic retail inflation and weak industrial
output data pulled down the indices further.
 Reports that the government might miss its divestment target
for the current fiscal and profit booking impacted the
benchmark indices.
 DIIs and volatility amid the expiry of the December futures and
options contracts weighed on the benchmarks.
Global Developments:
Tailwinds: The market rose sharply in reaction to firm global cues
in form of the announcement of a preliminary trade deal between
the US and China.
Headwinds: US plans to restore tariffs on steel imported from
Brazil and Argentina, as well as a few weak economic cues from
US.
Sectoral Impact:
S&P BSE sectoral indices ended mixed in December 2019. Metal
stocks shined amid positive global sentiment. S&P BSE Metal
was the top gainer, surging nearly 7%. Buying interest in realty
and information technology (IT) counters supported the upward
trajectory. The S&P BSE Realty index and S&P BSE IT index rose
5.26% and 4.04%. Auto stocks rallied owing to stock specific
developments; S&P BSE Auto index gained 2%. Selling
pressure was seen in oil and gas stocks and defensive counters,
such as healthcare and FMCG. S&P BSE Oil and gas index (top
sectoral loser), S&P BSE Healthcare index and S&P BSE FMCG
index fell 2.71%, 2.71% and 2.53%, respectively. Data Source:
CRISIL

3. Equity valuation index is calculated by assigning equal weights to Price to Earnings (PE), Price to book (PB), G-Sec*PE and
Market Cap to Gross Domestic Product (GDP)
Our Recommendation
Our Recommendations – Equity Schemes
Pure Equity
Schemes
ICICI Prudential Bluechip Fund
ICICI Prudential Multicap Fund
These Schemes aim to generate capital appreciation
through participation in equities.
Long-Term SIP
Schemes
ICICI Prudential Value Discovery Fund
ICICI Prudential Smallcap Fund
ICICI Prudential Midcap Fund
ICICI Prudential Large & Mid Cap Fund
These schemes aim to generate long term wealth
creation over a full market cycle.
Asset
Allocation
Schemes
ICICI Prudential Balanced Advantage Fund
ICICI Prudential Equity & Debt Fund
ICICI Prudential Multi-Asset Fund
ICICI Prudential Equity Savings Fund
ICICI Prudential Regular Savings Fund
ICICI Prudential Asset Allocator Fund (FOF)
These schemes aim to benefit from volatility and can be
suitable for investors aiming to participate in equities
with low volatility.
Thematic/
Sectoral
themes
ICICI Prudential India Opportunities Fund risk investm
Investors could invest in this thematic scheme for
tactical allocation.
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.
50
70
90
110
130
150
170
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Invest in Equities
Aggressively invest in Equities
Neutral
Incremental Money to Debt
Book Partial Profits
112.79
We believe with Valuations fully priced in, business cycle in the low to mid phase and sentiments in the moderate zone, it is
better to take a middle of the road approach and accumulate equities in Staggered/Systematic way. Hence, we strongly
recommend investors to continue their SIPs and for investors with a longer time horizon, it is a good time to be
constructive on equities by means of lumpsum investment.
Equity Valuation Index
Outlook & Triggers

4. ICICI Prudential Bluechip Fund is suitable for investors who are seeking*(An open ended equity
scheme predominantly investing in large cap stocks):
 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 Large & Mid Cap Fund is suitable for investors who are seeking**(An open ended
equity scheme predominantly investing in large cap and mid cap stocks):
 Long term wealth creation
 An open ended equity scheme investing in both large cap and mid 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*( An open ended
equity scheme following a value investment strategy):
 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 Equity & Debt Fund is suitable for investors who are seeking*(An open ended hybrid
scheme investing predominantly in equity and equity related instruments):
 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*(An open ended
dynamic asset allocation fund):
 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.
ICICI Prudential Multicap Fund is suitable for investors who are seeking*(An open ended equity
scheme investing across large cap, mid cap, small cap stocks):
 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.
ICICI Prudential Equity Savings Fund is suitable for investors who are seeking*(An open ended
scheme investing in equity, arbitrage and debt):
 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 for
them.
ICICI Prudential Multi-Asset Fund is suitable for investors who are seeking*(An open ended scheme
investing in Equity, Debt, Gold/Gold ETF/units of REITs & InvITs and other asset classes as may be
permitted from time to time):
• 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.
Riskometers

5. ICICI Prudential Regular Savings Fund is suitable for investors who are seeking*(An open ended
hybrid scheme investing predominantly in debt instruments):
 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.
ICICI Prudential Midcap Fund is suitable for investors who are seeking*(An open ended equity
scheme predominantly investing in mid cap stocks):
 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 for
them.
ICICI Prudential Smallcap Fund is suitable for investors who are seeking*(An open ended equity
scheme predominantly investing in small cap stocks):
 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.
ICICI Prudential Asset Allocator Fund (FOF) is suitable for investors who are seeking*(An open ended
fund of funds scheme investing in equity oriented schemes, debt oriented schemes and gold
ETFs/schemes) *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.:
 Long Term Wealth Creation
 An open ended fund of funds scheme investing in equity oriented schemes, debt oriented
schemes and gold ETFs/ schemes.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for
them.
ICICI Prudential India Opportunities Fund is suitable for investors who are seeking*(An open ended
equity scheme following special situation theme):
 Long Term Wealth Creation
 An equity scheme that invests in stocks based on special situations theme.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for
them.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
In preparation of the material contained in this document, ICICI Prudential Asset Management Company Limited (the AMC) has used
information that is publicly available, including information developed in-house. Some of the material used in the document may
have been obtained from members/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 information. 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. The AMC (including its
affiliates), the Mutual Fund, the trust and any of its officers, directors, personnel and employees, shall not be liable for any loss,
damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of
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as an investment advice. Investors are advised to consult their own legal, tax and financial advisors to determine possible tax, legal
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