We believe the equity market is in mid-cycle and recommend investors to invest basis their risk appetite. Read more in our Equity Market Outlook.

1. Equity Market Outlook
O v e r v i e wThe Market
Technicals (Data Source : Bloomberg)
Jul-17 Jun-17Investments by Institutions in the cash segment (Rs. Cr)
Avg Advance Decline Ratio
Valuation Ratios
Jul-17 Jun-17
Jul-17 10 Year Average
Jul-17Indices Movement Last 1 Yr
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.
Global economy
The International Monetary Fund (IMF) said global economic recovery is
on a firm footing as improving growth in China, Europe and Japan offset
downward revisions for the US and the UK. The economic think-tank
maintained the global growth rate at 3.5% for 2017 and 3.6% for 2018.
The US Federal Reserve (Fed) kept the interest rate unchanged at 1-1.25%
amid inflation concerns. It hinted at winding down its massive holdings of
bonds relatively soon as a sign of confidence in the US economy.
However, the IMF lowered the country's growth forecast for 2017 and
2018 to 2.1% each from 2.3% and 2.5%, respectively.
Eurozone economy expanded 2.1% in Q2 2017 compared to 1.9% in Q1
2017. The IMF upgraded Eurozone's growth outlook for 2017 and 2018 to
1.9% and 1.7% from the earlier projections of 1.7% and 1.6%,
respectively, owing to stronger momentum in domestic demand.
However, it warned that low inflation, fragile banks and Brexit are
significant risks. The European Central Bank (ECB) kept key interest rate
unchanged at 0% and reiterated its commitment to purchase assets of 60
billion euros a month until the end of this year and longer if needed.
The UK's economic growth slowed to 1.7% year-on-year in Q2 2017
compared with 2% growth in the preceding quarter amid slowdown in
the manufacturing and construction sectors. The IMF revised down the
UK's 2017 growth forecast by 0.3 percentage point to 1.7% and left its
2018 forecast unchanged at 1.5%.
The Bank of Japan (BoJ) kept its monetary policy unchanged but lowered
the inflation forecasts for FY18 and FY19 to 1.1% and 1.8%, respectively.
The central bank, however, remained upbeat on economic growth and
raised GDP projections for FY18 and FY19 to 1.8% and 1.4% from 1.6%
and 1.3%, respectively.
China's GDP grew 6.9% annually in Q2 2017, same growth as in Q1. The
IMF upgraded the country's growth forecasts for 2017 and 2018 to 6.7%
and 6.4%, respectively, on expectations that the government would
maintain a high level of public investment.
Source: CRISIL Research
Fundamentals and economics:
Growth
India's GDP slowed down to 6.1% in the January-March 2017 compared
to 7% in the previous quarter. The growth rate for the 2016-17 was at the
three-year low of 7.1% compared to 8% growth in the previous fiscal.
Industrial growth, as measured by the Index of Industrial Production (IIP),
slowed down for the second consecutive month of the fiscal. IIP growth
fell to 1.7% year-on-year in May 2017 from 2.8% in April 2017.
Cumulatively, IIP grew 2.3% in April-May 2017, down from 7.3% a year
ago. The manufacturing and mining sectors performed poorly in the
month. While growth in the manufacturing sector halved to 1.2% in May
2017 from 2.4% in April 2017, mining sector growth slipped into negative
territory (-0.9%). It was the second consecutive month of decline for both.
The electricity segment (8% weight) cushioned the downside with 8.7%
growth against 5.9% the previous month.
According to the use-based classification, the picture was similar. Decline
in the capital goods category continued for the second consecutive
month (-3.9% growth in May vis-à-vis -2.9% in April), signaling
persistence of the weak investment environment. Infrastructure and
construction segment – the new entrant to the IIP series with 2011-12
base – remained almost stagnant. In the consumer goods category, while
consumer non-durables managed to grow a healthy 7.9% in May
(compared to 8.4% in April), consumer durables displayed negative
growth for the sixth consecutive month.
Source: Mospi.nic.in, CRISIL Centre for Economic Research (CCER)
BSE 1.17 1.05
NSE 1.10 0.96
FIIs (Net Purchases / Sales) 2488 3940
MFs (Net Purchases / Sales)* 8129 9106
MF Data till July 27
P/E ratio- Sensex 23.35 18.60
P/E ratio- Nifty 25.02 18.30
Price/Book Value Ratio-Sensex 3.06 3.00
Price/Book Value Ratio-Nifty 3.57 2.90
Dividend Yield-Sensex 1.23 1.40
Dividend Yield-Nifty 1.06 1.40
S&P BSE Sensex 5.15% 15.91%
Nifty 50 5.84% 16.65%
S&P BSE Auto 4.51% 15.99%
S&P BSE Bankex 8.02% 30.94%
S&P BSE Capital Goods 5.25% 16.12%
S&P BSE Consumer Durables 2.84% 32.75%
S&P BSE Fast Moving Consumer Goods -3.21% 15.68%
S&P BSE Healthcare 0.03% -12.91%
S&P BSE Information Technology 6.15% -3.47%
S&P BSE Metal 9.25% 32.10%
S&P BSE MidCap 5.09% 21.55%
S&P BSE Oil & Gas 7.48% 33.93%
S&P BSE PSU 7.08% 20.88%
S&P BSE Realty 7.00% 36.04%
S&P BSE SmallCap 4.43% 30.74%
S&P BSE Teck Index 6.76% -0.91%
Inflation
India's Consumer Price Index (CPI)-based inflation fell to a record low of
1.54% in June 2017 owing to fall in food inflation to -2.1% in June (against
-1.1% in May). The decline was led primarily by the pulses and vegetables

2. O v e r v i e wThe Market
Equity Market Outlook
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.
Currency
The rupee ended stronger against the US dollar in July, with the
exchange rate settling at Rs 64.18 per dollar on July 31, 2017 as against Rs
64.58 per dollar on June 30, 2017. Periodic dollar sales by foreign banks
for foreign institutional investor inflows into domestic equities gave the
rupee support. The local currency was aided by the US Fed Chair's dovish
Congressional testimony mid-month. The dollar weakened further
following the European Central Bank's (ECB's) monetary policy decision,
thereby benefitting the rupee. Comments from US Fed officials towards
the end of the month led to diminished expectation of another interest
rate hike in this calendar year, and strengthened sentiment for the rupee.
Further rupee gains were erased by intermittent dollar demand from
state-owned banks. Gains registered by the dollar following the Bank of
Japan's (BoJ's) monetary policy decision put the rupee under pressure
briefly. The rupee was also pulled down by reports of geopolitical
tensions between India and China and by North Korea's announcement
that it had test-fired an intercontinental ballistic missile.
Source: CRISIL Research
Market sentiment
Flows
Foreign institutional investors (FIIs) continued to be buyers of equities.
FIIs bought equities worth Rs 24.88 billion in July 2017 compared to
buying of Rs 39.40 billion in June. Mutual funds also remained buyers of
equities in July 2017. They bought equities worth Rs 81.29 billion in July
(until July 27) compared with Rs 91.06 billion in June 2017.
Deficit
India's Fiscal Deficit touched Rs 4.42 trillion ($68.88 billion) during April-
June period or 80.8% of the budgeted target for the current fiscal year
that ends in March; the Fiscal Deficit was 61.1% of the full-year target
during the same period a year ago.
India's Current Account Deficit (CAD) surged to $3.4 billion, or 0.6% of
GDP, in the fourth quarter of 2016-17 as against $0.3 billion (0.1% of GDP)
in the same quarter last year but narrowed from $8.0 billion (1.4% of GDP)
in the preceding quarter. The widening of CAD year-on-year was
primarily on account of a higher trade deficit ($29.7 billion) brought about
by a larger increase in merchandise imports relative to exports. Net
services receipts increased year-on-year owing to a rise in net earnings
from travel, transport, construction and other business services.
India's exports grew 4.4% year-on-year to $23.5 billion in June 2017
compared to 8.3% in May 2017. Growth in exports of non-oil goods also
declined, to 4.5% from 6.6% in May. Export growth was negative in 15 of
top 30 commodities, the most prominent being gems & jewellery (-2.7%),
pharmaceuticals (-2.2%) and textiles (-1.4%). However, export growth
was robust in engineering goods (14.8%), organic and inorganic
chemicals (13.2%) and rice (27.3%).
Imports grew 19% year-on-year in June 2017 to $36.5 billion, compared
to 33.1% in the previous month. The largest rise in imports was seen in
precious and semi-precious stones (86.3%) and electronic goods
(24.2%). Imports of investment-related goods rose 7.6%, after declining
0.9% in the previous month. The trend of imports growing faster than
exports is expected to continue this fiscal, as domestic demand
strengthens. Accordingly, the trade deficit was $12.9 billion in June 2017
compared to $13.84 billion in May 2017.
Source: RBI
Brent
Brent crude oil prices rose sharply by 8% to close the month at $52.65 per
barrel on July 31 vis-à-vis 47.92 per barrel on June 30, 2017 on reports of
decline in US crude oil inventories. Fresh pledges from Saudi Arabia and
Nigeria to reduce crude oil exports and limit output, respectively, also led
to price gains. Some gains were erased on news that Russia had ruled out
proposals to deepen the global production cuts and reports of higher
monthly exports from OPEC.
Source: CCER
Source: Mospi.nic.in, CCER
Source: SEBI
category where inflation was down at -21.9% and -16.5%, respectively.
Excluding these categories, food inflation printed at 1.3% compared with
1.6% in May. This suggests inflation has been declining in other food
categories as well – including cereals (down 40 bps to 4.4%), eggs (down
80 bps to nearly zero), milk (down 40 bps to 4.1%), edible oils (down 36
bps to 2.3%) and sugar (down 110 bps to 8.7%).
Fuel inflation eased further in June as global crude oil prices fell nearly 3%
year-on-year and 8% month-on-month, while the rupee stayed stable.
Fuel inflation slowed to 4.3% in June from 6.2% in May. Within this
category, inflation in fuel and light fell to 4.5% from 5.5%, while in petrol
and diesel, it fell to 3.3% from 8.8%. Core inflation CPI excluding food,
fuel and light, petrol and diesel) was unchanged from the previous
month, at 4.1%. Some easing in categories such as household goods and
services, education, transport and communication was offset by higher
inflation in personal care and recreation services.
Wholesale Price Index (WPI) slipped to a 14-month low of 0.90% in June
2017 as food inflation remained negative.
Market Performance
Indian equity indices extended their record-breaking run in July. S&P BSE
Sensex hit a fresh record high of 32,515 and Nifty 50 touched the 10000-
mark for the first time in 21 years. Benchmarks gained over 5% in the
month. Easing worries over major disruption following the
implementation of the Goods and Services Tax (GST) on July 1, 2017 and
positive global cues brought in sharp gains.
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
CPI WPI
Inflation
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
40,000
Cr.
FII Flows
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
MF Flows

3. O v e r v i e wThe Market
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.
Our Recommendations
Investors may continue with their SIPs in pure equity funds. For new
investors we recommend SIP in Dynamic Asset Allocation Funds.
Volatility due to global factors may continue to stay in the near term.
Investors with an intent to benefit from volatility are recommended for
lump-sum investments in dynamic asset allocation funds. For tactical
allocation, investors could consider thematic funds which focus on
infrastructure theme.
ICICI Prudential Value Discovery Fund
ICICI Prudential Top 100 Fund
ICICI Prudential Multicap Fund
ICICI Prudential Focused Bluechip Equity Fund
ICICI Prudential Select Large Cap Fund
Pure Equity Funds
These funds are positioned
aggressively to gain from recovery in
the economy and commodity prices.
These funds aim to generate long term
wealth creation.
Our Recommendations – Equity Schemes
Asset Allocation Funds
ICICI Prudential Balanced Advantage Fund
ICICI Prudential Balanced Fund
ICICI Prudential Dynamic Plan
Theme-based funds
ICICI Prudential Infrastructure Fund Investors could invest in this thematic
fund for tactical allocation. It would be a
high risk investment option.
These funds aim to benefit from
volatility and can be suitable for
investors aiming to participate in
equities with lower volatility.
Equity valuations show that the market valuations are in the zone where investors are recommended to invest in funds with low net equity levels
within the dynamic asset allocation fund category.
Equity Valuation Index
Equity valuation index is calculated by assigning equal weights to Price to equity (PE), Price to book (PB), G-Sec*PE and Market Cap to Gross Domestic
Product (GDP)
Equity Valuation Index
Market Outlook and Triggers
MSCI Emerging Market Index outperformed MSCI Developed Market
Index by 3%. This was the seventh consecutive month of
outperformance. India with +5% had the best month on year-to-date
(YTD) driven by smooth GST implementation, good progress of
monsoons and expectations of rate cuts.
Even after the recent run-up, we continue to believe that the equity
market is in mid-cycle due to parameters such as credit growth, earnings
growth, inflation and capacity utilisation, which appear to be close to
cyclical lows. Several reforms / actions such as Goods and Services Tax
(GST), infrastructure thrust from the government and financial inclusion
are in place that is likely to support higher growth. However, the same is
subject to an earnings upgrade cycle, which is critical for the current
valuations to sustain and the volatility that may arise due to uncertainty of
global events.
The GST reform implemented on July 1, 2017, is expected to improve the
ease of doing business in India as multiple taxes reduce and further
support inter-state business. The political stability gives high visibility to
policy continuity well beyond 2019. This has brought-up India's position
on the global stage as an attractive destination for investment. The same
is also reflected in the FII flows to India.
In this mid-cycle, investors are recommended to invest in dynamic asset
allocation funds as they are well-positioned to benefit from market-cycles
over long-term. Investors looking to take exposure in pure-equity funds
for long-term could also consider investing systematically in ICICI
Prudential Value Discovery Fund. For thematic exposure, investors could
consider ICICI Prudential Infrastructure Fund.
The market was mainly boosted by hopes of interest rate cut by the
Reserve Bank of India (RBI) amid falling retail inflation and discouraging
industrial output numbers. Actions remained stock-specific owing to
quarterly earnings. More gains were seen owing to sustained buying by
domestic institutional investors (DIIs) and FIIs. Positive global cues
including dovish comments from the US Federal Reserve (Fed), renewed
interest in US technology stocks and encouraging economic cues from
China including growth in domestic product and industrial output data
augured well for the indices.
More gains were, however, capped owing to a sharp fall in the index
heavyweight after the GST Council decided to raise cess on cigarettes in a
bid to reduce profiteering by companies. Disappointing quarterly earning
numbers from some companies, emergence of profit booking after
recent gains and expiry of the July futures and options contract weighed
on the indices. Worries that the global central banks could soon scale
back some of their stimulus measures dented global risk appetite and put
some pressure on domestic equities.
Most of the S&P BSE Sectoral indices ended higher in July 2017. S&P BSE
Metal index was the top gainer – up 9.25% month-on-month (MoM) amid
strong global metal prices and positive cues from China. Interest rate
sensitive stocks rose amid expectations of an interest rate cut. S&P BSE
BANKEX, S&P BSE Realty and S&P BSE Auto surged MoM by 8%, 7% and
4.5%, respectively. Strong buying interest was seen in the oil & gas and IT
stocks; S&P BSE Oil and Gas and S&P BSE IT rose 7.48% and 6.15%,
respectively. S&P BSE FMCG was the only laggard – down over 3% after
the increase in cess on cigarettes pulled down the index major.
Source: NSE, BSE

4. MutualFundinvestmentsaresubjecttomarketrisks,readallschemerelateddocumentscarefully.
Disclaimer: In the preparation of the material contained in this document, the Asset Management Company (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
haveincludedstatements/opinions/recommendationsinthisdocument,whichcontainwords,orphrasessuchas“will”,“expect”,“should”,“believe”andsimilarexpressionsorvariationsofsuchexpressions
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
policiesofIndia,inflation,deflation,unanticipatedturbulenceininterestrates,foreignexchangerates, 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,
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