- The RBI kept key policy rates unchanged, including keeping the repo rate at 4%. - Inflation increased in June 2020 to 6.09% due to rising food and fuel prices. - Economic activity has remained fragile both domestically and globally, though equity markets have rebounded. - RBI is likely to continue its accommodative stance to support growth but may reduce the pace of rate cuts. It is also expected to address the oversupply of government bonds through measures like increasing banks' bond holding limits.

1. Impact Analysis
Monetary Policy Statement, 2020-21
What is RBI’s Stance?
RBI policy highlights:
• 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%
Inflation highlights:
• CPI (Consumer Price Index) inflation, ex food and fuel, surged up from 5.00%
in May 2020 to 5.19% in June 2020
• Owing to increase in food and fuel inflation, retail inflation surged up from
4.65% in May 2020 to 6.09% in June 2020
• Housing inflation moderated further in June 2020 reflecting subdued
demand
Domestic Economy
• Global economic activity in Advanced Economies (AE's) as well
as in major Emerging Market Economies (EMEs) has remained
fragile and in retrenchment in several geographies since the
last MPC meeting in May 2020
• Equity markets rebounded in the AE’s as well as in EMEs with
intermittent pauses, shrugging off the volatility and sharp
correction recorded in Q1:2020
• Most EMEs currencies have appreciated in close co-
movement, tracking weakening of the US dollar
• Crude oil prices have remained supported on supply cuts by oil
producing countries (OPEC plus) and improved demand
prospects on the gradual easing of lockdown restrictions since
May.
• Gold prices remained elevated on hedging demand
Global Economy
Accommodative
RBI’s
Inflation
Target
Data Source: RBI Monetary Policy Statement 2020-21 dated August 06, 2020, RBI Statement on Developmental and Regulatory Policies
dated August 06, 2020 ; Data Source for CRR & SLR: RBI
• Index of industrial production (IIP), moderated to -34.7% in May
2020 from -57.6% in April 2020
• The manufacturing Purchasing Managers Index (PMI) and
services PMI remained in contraction, shrinking to 46.0% and
34.2% respectively in July 2020.
• The weighted average lending rates (WALR) on fresh rupee
loans of commercial banks declined by 91 bps during March-
June 2020
• The spreads of 3-year AAA rated corporate bonds over G-Secs
of similar maturity declined from 276 bps on March 26, 2020 to
50 bps by end-July 2020.
• Up to July 31, 2020, India’s foreign exchange reserves have
increased by US$ 56.8 billion in 2020-21 to US$ 534.6 billion –
equivalent to 13.4 months of imports.
2.5
4.5
6.5
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
RBI Policy Rates Trend- Last 1 year
Repo Rate CRR Reverse Repo
0
2
4
6
8
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
CPI Inflation (Month-on-Month %)

2. Our View
• Overall, RBI MPCs decision on policy rate was neutral
• RBI will continue to give precedence to growth and to maintain conducive financial condition and hence may continue with its
accommodative stance
• We expect inflation to moderate going forward as the impact of supply side disruption will start to recede
• For this calendar year we have already seen RBI cutting repo rate by 115 bps, going forward, we believe, this pace to reduce and we
may see a further rate cut in the second half of financial year 2020
• We expect RBI to address the concerns of oversupply of government bonds
• Some of the measures which we believe RBI may include:
1. Increase in HTM (Hold to Maturity) limit of bonds for banks
2. RBI may be buying large quantity of government bonds either through Open Market Operation (OMO) purchases or in the primary
market to help improve demand-supply.
3. Long Term Repo Operations of 5 Years & above.
• At this juncture, term premiums continue to remain elevated. So we recommend investors to add duration to the portfolios, as the longer
end provides better carry and higher safety due to steepness in the yield curve.
• Also, we would recommend investing in schemes which have good exposure towards spread assets (AA Corporate Bonds), as spread
assets provides better risk adjusted returns.
• In the end, to summarize:
1. RBI may continue maintaining its accommodative stance, but the quantum of rate cuts is expected to remain low from here.
2. Add duration to the portfolios and move up the duration curve, to benefit from capital appreciation.
3. Add spread assets (AA Corporate Bonds) to the portfolios to benefit from higher carry over repo.
Our Analysis & Outlook
Scheme Recommendations
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
Gilt Schemes (Tactical
Call)
ICICI Prudential Constant Maturity Gilt Fund
ICICI Prudential Gilt Fund
These schemes aim to benefit
from duration
Impact Analysis
Data Source: RBI Monetary Policy Statement 2020-21 dated August 06, 2020, RBI Statement on Developmental and Regulatory Policies
dated August 06, 2020 ; Data Source for CRR & SLR: RBI

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. 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.
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 Constant Maturity Gilt Fund (An open ended debt scheme investing in government
securities having a constant maturity of 10 Years) is suitable for investors who are seeking*
 Long term wealth creation
 A gilt fund that aims to provide reasonable returns by investing in portfolio of Government Securities
while maintaining constant maturity of the portfolio at 10 years.
 ICICI Prudential Gilt Fund (An open ended debt scheme investing in government securities across
maturity) is suitable for investors who are seeking*
 Long term wealth creation
 A Gilt scheme that aims to generate income through investment in Gilts of various maturities.
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.