- The Reserve Bank of India (RBI) kept its policy rates unchanged at 4% for repo rate and maintained its accommodative stance. - RBI revised its inflation forecast higher for the second half of FY21 but acknowledged that economic growth is recovering faster than expected. - RBI expects the economy to contract by 7.5% in FY21, a lower contraction than previously estimated, and for inflation to remain elevated in the near future.

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CPI Inflation (Month-on-Month %)
Impact
Analysis
Monetary Policy Statement, 2020-21
 National Statistical Office (NSO) released the real Gross Domestic Product (GDP) data on November 27,
2020 which showed a contraction of 7.5% in Q2:2020-21 (July-September 2020). However, in Q3:2020-21
(October-December 2020), high frequency indicators point to a recovery gaining traction, with double digit
growth.
 The outlook for agriculture remains bright due to favourable monsoon this year.
 Domestic financial conditions remained easy in October-November 2020.
 System liquidity continued to be in large surplus.
 Up to November 27, 2020, India’s foreign exchange reserves stood at US$ 574.8 billion.
1
RBI POLICY HIGHLIGHTS INFLATION HIGHLIGHTS
DOMESTIC ECONOMY
WHAT IS RBI’S STANCE? ACCOMMODATIVE
• CPI (Consumer Price Index) inflation, ex food
and fuel, surged up from 5.66% in September 2020
to 5.77% in October 2020
• Owing to high food and fuel inflation, retail
inflation surged up from 7.27% in September 2020
to 7.61% in October 2020
• Housing inflation was moderate in October 2020
reflecting moderate demand
• RBI kept the Repo rate unchanged at 4.00%
• Reverse Repo rate remains adjusted at 3.35%
• Marginal Standing Facility (MSF) rate and the Bank
rate accordingly remains adjusted to 4.25%
• Cash Reserve Ratio (CRR) remains unchanged at 3%
• Statutory Liquidity Ratio (SLR) remains adjusted to
18.00%
Data Source: RBI Monetary Policy Statement 2020-21 dated December 04, 2020, Data Source for CRR & SLR: RBI
RBI’s
Inflation
Target
2.5
3.5
4.5
5.5
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
RBI Policy Rates Trend- Last 1 year
Repo Rate CRR Reverse Repo

2. GLOBAL ECONOMY
 The outlook for Q4 (October-December) of 2020 is overcast due to surge in COVID-19 infections along with
accompanying lockdowns across major Advanced Economies (AE's) as well as major Emerging Market Economies
(EMEs). Progress on vaccine candidates has, however, generated some offsetting optimism.
 Global trade recorded a rebound in Q3 (July-September) of 2020 as lockdowns were eased, but it is likely to slow in
Q4 (October-December) of 2020 as pent-up demand is exhausted, inventory restocking is completed, and trade-
related uncertainty is rising with the second wave.
 Equity markets in the AE’s as well as in EMEs remain buoyant, supported by highly accommodative monetary policies
and positive news on the vaccine.
 CPI inflation in AE's remained muted whereas, it picked up in some EMEs due to firming food prices and supply
disruptions.
OUR ANALYSIS & OUTLOOK
The Reserve Bank of India (RBI) kept its policy rates unchanged and below were the key pointers pertaining to the policy:
• The Monetary Policy Committee (MPC) retained its current accommodative policy stance and gave guidance to
maintain the same going into the next financial year.
• MPC is of the view that inflation is likely to remain elevated which is constraining the monetary policy from using
the space available to act in support of growth
• Inflation forecast is revised higher by 140 bps for Q3 FY21 to 6.8% year-on-year from 5.40% (October 9, 2020 policy)
and 130 bps for Q4 FY21 to 5.8% from 4.5% (October 9, 2020 policy)
• MPC acknowledged that growth is recuperating faster than anticipated, however the nurturing of growth should be
extended for some more time for a broad based recovery
• Growth forecast revised upwards. Real GDP is expected to contract at a lower rate of -7.5% in FY21 compared to
earlier estimates of -9.5% (October 9, 2020 policy).
• RBI extended scope of on-tap TLTRO (Targeted Long Term Repo Operations) to 26 stressed sectors to synergize with
government ECLGS 2.0 (Emergency Credit Line Guarantee Scheme) scheme and tighter regulations for NBFC/HFC.
OUR VIEW
• RBI seems to continue with current policy stance without rocking the boat, especially when the growth recovery is
in its nascent stage. RBI has also provided continuity to its forward guidance.
• RBI may continue to give precedence to growth and may accept higher inflation for some period knowing that it is a
supply-side inflation and is driven by higher margin charged by the oligopolistic distribution system in a weak
demand environment.
• Also, RBI may have to juggle deftly through this period of excess liquidity, striking a balance between its objective
on inflation, bond yields and currency.
• Going forward, we assign low probability for rate cuts due to change in growth and inflation dynamics.
• We believe that going forward, accrual income shall be a significant component of the return for bond investors and
returns from capital appreciation may take a back seat.
• The high term premium provides much needed defense to the portfolio at this juncture, so schemes which can be
opportunistic or active in duration management may benefit from tactical exposure towards the long end of the yield
curve.
• The spread assets (non-AAA Corporate Bond space) provide better carry and margin of safety relative to AAA
Corporate bond and money market instruments. So, schemes which have good mix of spread assets are
recommended.
2
Monetary Policy
Statement, 2020-21
Data Source: RBI Monetary Policy Statement 2020-21 dated December 04, 2020, Data Source for CRR & SLR: RBI

3. ICICI Prudential Credit Risk Fund (An open ended debt scheme predominantly investing in AA and below
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ICICI Prudential Short Term Fund (An open ended short term debt scheme investing in instruments such that
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• Short term income generation and capital appreciation solution
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Investors understand that
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Short to Medium
Duration Schemes
ICICI Prudential Savings Fund
ICICI Prudential Floating Interest Fund
ICICI Prudential Ultra Short Term Fund
ICICI Prudential Short Term Fund
ICICI Prudential Banking & PSU Debt Fund
ICICI Prudential Medium Term Bond Fund
These schemes aim to
benefit from steepness of
yield curve
Credit Risk Scheme ICICI Prudential Credit Risk Fund
This scheme aim to benefit from
accrual income
Dynamic Duration Scheme ICICI Prudential All Seasons Bond Fund
This scheme aim to benefit from
interest rate changes
SCHEME RECOMMENDATIONS
DISCLAIMER
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 (includ- ing 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. The information contained herein is only for the purpose of
information and not for distribution and do not constitute an offer to buy or sell or solicitation of any offer to buy or sell any securities or financial
instruments in the United States of America ("US") and/or Canada or for the benefit of US persons (being persons falling within the definition of the term "US
Person" under the US Securities Act, 1933, as amended) or persons residing in Canada.
RISKOMETERS
3
Monetary Policy
Statement, 2020-21

4. 4
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
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Moderate
• Medium term savings
• A debt scheme that invests in debt and money market instruments with a view to maximize income
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Investors understand
that their principal will
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*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential All Seasons Bond Fund (An open ended dynamic debt scheme investing across
duration) is suitable for investors who are seeking*: Moderate
Investors
understand that their
principal will be at
•All duration savings • A debt scheme that invests in debt and money market instruments with a
view to maximise income while maintaining optimum balance of yield, safety and liquidity
LOW HIGH Moderate risk
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
ICICI Prudential Ultra Short Term Fund(An open ended ultra-short term debt scheme investing in instruments
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who are seeking*: Moderate
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Investors understand
that their principal will
LOW HIGH be at moderate risk
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
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*: Moderate
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Investors understand
that their principal will
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*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
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
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Investors understand
that their principal will
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*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
*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.
RISKOMETERS
Monetary Policy
Statement, 2020-21
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*:
Moderate
Investors understand
that their principal will
LOW HIGH be at moderately low risk
• 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.