Market Outlook 2018 - ICICI Prudential Mutual Fund

Investment Outlook 2018
Making The Right Moves

Puzzle to unlock the theme of Outlook 2018
2
11.
4.
7. 15.
2.
13.
9.
1. 3. 5. 6. 8. 10. 12. 14.
DOWN
1. ICICI Prudential Regular Savings Fund follows _______Strategy of Investment
3. Softbank almost merged Flipkart with this company in 2017
5. This was one of the 2017's best performing sectors in India
6.
The founder of this company temporarily overtook Bill Gate as the richest
person in 2017
8. The midcap stocks are trading at a significant premium to this
10. Ability to borrow
12. US Fed Reserve's move from Quantitative Easing to Quantitative __________
14. This group of nations controls crude oil supply
UP
2. The Indian govt announced Rs 2.1 trn for the recapitalisation of these entities
4. Moody's did this to India's sovereign rating after 13 years in 2017
7. The Indian fixed income market has been concerned about these slippages
9. Raghuram Rajan's 2017 book "I -- what I --"
11. This region voted for independence from Spain in 2017
13. 2017's deadly cyclone which hit the south of India
15. The youngest French President in history
The solution to this quiz is at the end of the presentation.

Rear-view mirror: Glancing through 2017
3
26,000
27,000
28,000
29,000
30,000
31,000
32,000
33,000
34,000
35,000 Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
S&PBSESensexlevels
GST officially
rolled out
RBI cuts rates
by 25 bps
Govt announces bank
recapitalization programme
forRs 2.1 lakh crore
US Fed hikes rate by
25bps
US Fed hikes rate
again by 25bps
US Fed hikes rates by
25bps
GDP growth rate falls
to 3-yr low of 5.7%
Rail Budget merged
with Union Budget
Bitcoin
begins
meteoric rise
above USD
10,000
India jumps 30 spots
to 100 on World
Bank’s ease of doing
business index
Moody’s upgrades
India for the first
time since 2004;
rating upgraded to
Baa2
Markets continued to rise
in 2017 on the back of
government initiatives,
ratings upgrades and
optimism in global
markets.
Neither demonetisation,
nor the challenges in GST
implementation at the
initial stage could
dampen the market’s
‘positive spirits’.
Source: CEIC, Research; Data as of Dec 29, 2017; Past performance may or may not sustain in future

Recap: Our calls in 2017
4
Increase Equity Allocation
Post Budget in February Prudent Budget
Increase Equity Allocation in November 2017
December is usually considered a
favourable month
Invest in ICICI Prudential Exports and Other Services
Fund and ICICI Prudential Technology Fund
Valuation in few sectors attractive
Invest in Asset Allocation Schemes & ICICI Prudential
Focused Bluechip Equity Fund
Market in mid-cycle – Asset Allocation
and sticking to quality – The Key
Invest in Accrual, Short-to-Medium Duration
& Dynamic Duration schemes
Fixed Income market may be volatile
Our Calls Rationale

Stock market performance around the world
5
Source: MFI Explorer, UK – FTSE 100, China – Shanghai Composite Index; France – CAC 40; Taiwan – TWSE; Germany – DAX; Indonesia – Jakarta Composite Index; Japan – TOPIX;Brazil – BOVESPA; South Korea
– KOSPI; India – NIFTY; US – NASDAQ; Hong Kong – Hang Seng; Data as on Dec 31, 2017; Past performance may or may not sustain in future; Returns are in absolute term
6.6
7.7
9.3
12.6
15.1
19.2 20.1
21.8
26.9
28.3 28.7
36.1
China UK France Germany Taiwan Japan Indonesia South
Korea
Brazil US India Hong
Kong
Performance in 2017 (%)

Foreign Flows to Emerging Markets (USD bn)
6
CY2007 18.5 3.6 -29.3 2.2 1.5
1.4
CY2008 -12.9 1.8 -36.6 -15.5 -4.8
-1.1
CY2009 17.6 1.4 24.7 15.7 1.1
0.4
CY2010 29.3 2.4 19.8 9.6 2.7
1.2
CY2011 -0.5 3.0 -8.5 -9.1 -0.2
1.3
CY2012 24.5 1.7 15.1 4.9 2.5
2.6
CY2013 19.8 -1.8 4.9 9.2 -6.2
0.7
CY2014 16.2 3.8 5.7 13.2 -1.1
1.3
CY2015 3.3 -1.6 -3.6 3.3 -4.4
-1.2
CY2016 3.7 1.2 10.0 10.9 2.1
0.1
CY2017 7.5 -2.9 8.0 5.7 -0.9 1.0
INDIA INDONESIA SOUTH KOREA TAIWAN THAILAND PHILIPPINES
Source: East India Securities; Data as on Dec 29, 2017; CY – Calender Year

0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Yields(%)
Eurozone
Global bond yield movement in 2017
7
2.0
2.1
2.2
2.3
2.4
2.5
2.6
2.7
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Yields(%)
USA
0.5
0.7
0.9
1.1
1.3
1.5
1.7
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Yields(%)
UK
(0.04)
(0.02)
0.00
0.02
0.04
0.06
0.08
0.10
0.12
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Yields(%)
Japan
3.0
3.2
3.4
3.6
3.8
4.0
4.2
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Yields(%)
China
6.0
6.2
6.4
6.6
6.8
7.0
7.2
7.4
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Yields(%)
India
High: 7.3%
Low: 6.3%
High: 4.0%
Low: 3.1%
High: 0.11%
Low: -0.01%
High: 2.6%
Low: 2.0%
High: 0.6%
Low: 0.2%
High: 1.5%
Low: 0.9%
Source: CRISIL Research ; Based on 10-year Government Securities of respective countries, Data as of Dec 29, 2017; Past performance may or may not sustain in future

Crude bounced back in 2nd Half - 2017
8
Post July 2017, crude oil prices
have been on the rise as the
Organisation of Petroleum
Exporting Countries (OPEC)
cut oil production.
In the meeting held in
November 2017, the OPEC
countries agreed to continue
to limit production to 1.8
million barrels per day.
40
45
50
55
60
65
70
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Priceperbarrel
(inUSD)
Source: US Energy Information Administration, Data as of Dec 29, 2017; Past performance may or may not sustain in future
2017

All that glittered wasn’t gold…
9
Gold as an asset class
has given a muted
performance in the last
five years.
Investors could look to
invest a part of their
portfolio in this asset
class.
14%
0%
22% 21%
17%
29%
19%
24%
29%
12%
-18%
2%
-8%
11%
6%
-30%
-20%
-10%
0%
10%
20%
30%
40%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Gold Returns (%)
Source: World Gold Council (in INR terms), Data as of Dec 29, 2017; Past performance may or may not sustain in future;

US equities rallied supported by the US Federal
Reserve’s bond buying programme
10
-
500
1,000
1,500
2,000
2,500
3,000
0
1,000
2,000
3,000
4,000
5,000
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Fed balance sheet (LHS, US$ bn) S&P 500 Index (RHS)
Central banks globally had
adopted expansionary
monetary policies which
supported equity markets.
However, with central banks
already scaling back on their
bond purchases, equity
markets may come under
pressure going forward.
$
Source: https://www.federalreserve.gov/; Kotak Institutional Securities ; Data as of Dec 29, 2017, Fed – US Federal Reserve
Bond Buying Program
(LHS, US$ Bn)

INDIA in 2017 – A year of
new highs, upgrades, and
reforms
11

Some of the Reforms announced in 2017
12
Increased government spending
on rural housing and agriculture
`
Bank Recapitalisation
programme
Implementation of
Goods and Services Tax (GST)
Government initiatives
for infrastructure building

Broader market performance through the year
13
7.4 8.0
46.1
0
5
10
15
20
25
30
35
40
45
50
2015 2016 2017
S&P BSE SENSEX
Closed at 33,940
1.9
27.5
-5
0
5
10
15
20
25
30
35
2015 2016 2017
Performance (%)
Closed at 17,573 Closed at 18,991
S&P BSE MIDCAP S&P BSE SMALLCAP
Performance (%)Performance (%)
6.8
1.8
57.7
0
15
30
45
60
2015 2016 2017
Source: MFI Explorer. Data as of Dec 25, 2017; Past performance may or may not sustain in future; Returns are in absolute term

Sectoral performances during the year
Source: MFI Explorer. Data as of Dec 29, 2017; All indices are of S&P BSE and carry the prefix of S&P BSE; Abbreviated FMCG - S&P BSE Fast Moving Consumer Goods; Infra. - S&P BSE India Infrastructure; IT - S&P BSE
Information Technology. The sector(s)/stock(s) mentioned in this presentation do not constitute any recommendation of the same and ICICI Prudential Mutual Fund may or may not have any future position in these
sector(s)/stock(s).
Realty was
the top
performing
index during
the year.
Telecom
among the
top
performing
indices after
a decade.
-40
-20
0
20
40
60
80
100
120
Sectoral Performances (%)
2015 2016 2017

` snaps its 6-year weakening trend
15
Rupee at this time is
overvalued and may
witness a reversal as
the US Dollar could
strengthen due to
further improvement in
US economy
4.1%
-18.7%
-3.2%
-13.0%
-1.8%
-4.4%
-2.7%
6.1%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
2010 2011 2012 2013 2014 2015 2016 2017
Rupee Strengthens against USD
Source : World Gold Council; Past performance may or may not sustain in future

Financial Savings over Physical Savings in 2017
16
Positive real rates and
fiscal consolidation
could boost domestic
savings, particularly
financial savings. Higher
rate of financial savings
could be used to fund
the investment needs of
the economy.
Source : Deutsche Bank Research, F – Forecast, FY – Financial Year
`
-3
-2
-1
0
1
2
3
30
40
50
60
70
FY13 FY14 FY15 FY16 FY17F FY18F
Financial savings, LHS Physical savings, LHS Real interest rate, RHS
% of Total %

Flows into India in 2017 (in USD bn)
17
FPIs -Equity FPIs - Debt
CY2007 18.5 2.4 6.0
CY2008 -12.9 2.7 16.6
CY2009 17.6 1.2 5.3
CY2010 29.3 10.1 -4.8
CY2011 -0.5 8.5 5.9
CY2012 24.5 6.9 -10.9
CY2013 19.8 -8.0 -12.9
CY2014 16.2 26.3 -5.1
CY2015 3.3 7.6 10.3
CY2016 2.9 -6.4 5.4
CY2017 7.7 22.9 13.9
CY2007 1.4 4.6
CY2008 3.3 13.4
CY2009 -1.2 6.5
CY2010 -5.9 1.2
CY2011 1.3 4.6
CY2012 -3.8 -7.0
CY2013 -3.8 -9.2
CY2014 4.8 -9.9
CY2015 10.9 -0.6
CY2016 6.9 -1.5
CY2017 17.9 -4.0
Mutual Funds
`
Banks/FIs/Insurance
`
DIIs
`
Source : NSDL; Kotak Institutional Equities; Past performance may or may not sustain in future; FPI – Foreign Portfolio Investors; DII – Domestic Institutional Investors, FI- Financial Institutions

Equity Outlook
“The beauty of periodic rebalancing is that it forces you to
base your investing decisions on a simple, objective standard.”
– BENJAMIN GRAHAM

Market checklists for peak – ‘VCTS’
19
`
• High P/E
• High P/B
• Market Cap / GDP
more than 100.
Market Valuation
• High Corporate earnings
Trigger
`
Business Cycle
• High Capacity Utilization
• Large Capex Announcements
• High Credit Growth
• Buoyant Economy
• A particular theme receiving
highest inflows.
• Bank deposit moving to equities.
• Asset Allocation is forgotten.
• Increased Initial Public Offerings
with higher retail participation.
Sentiment

67.7
73.8
82.2 82.6
79.2
90.0
86.3
72.8 73.5 73.3 74.1 73.5
69.0 68.8
70.2
72.6
Long Term Average (76%)
Capacity Utilization in (%)
Business Cycle
20
Source : Kotak Institutional Securities, All Data as of Fiscal Year

21
45
53
65
86
147
52
95 95
55
69
61
84
74 74
94
0
20
40
60
80
100
120
140
160
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Market Cap to GDP (%)
Long Term
Average (%)
Market Valuation
Source : Axis Direct, Data as of Dec 2017

Market Valuation
22
0
5
10
15
20
25
30
Jan-03
Nov-04
Sep-06
Aug-08
Jun-10
May-12
Mar-14
Feb-16
Dec-17
Trailing PE Average +/- 1SD +/- 2SD
BSE500 Index
PE
Trailing PE of the market is more than
2 SD above average
(500)
(300)
(100)
100
300
500
700
Jan-03
Dec-04
Oct-06
Aug-08
Jul-10
May-12
Mar-14
Feb-16
Dec-17
BSE500 Yield Gap(20dma, bps)
Earnings Yield Gap is close
to all-time low
Source : IIFL Research, Data as of Dec 2017; SD – Standard Deviation; PE – Price-to-earnings; dma - Daily Moving Average s; bps – basis points; Yield Gap – It is the ratio of earnings yield and
yield of long term government bond. BSE 500 – S&P BSE 500

Market Valuation
23
Largecap are trading at 1SD above average on a
forward PE basis
5
7
9
11
13
15
17
19
21
Jan-06
Oct-07
Jun-09
Mar-11
Nov-12
Jul-14
Apr-16
Dec-17
Nifty Fwd PE Average +/- 1SD
0.5
0.6
0.7
0.8
0.9
1.0
1.1
Jan-06
Jul-07
Dec-08
Jun-10
Dec-11
Jun-13
Dec-14
Jun-16
Dec-17
NSE MidCap trailing PB relative to Nifty Average
Midcap valuations compared to largecap
are at decade high
PE
(20 dma)
Source : IIFL Research, Data as of Dec 2017 ; SD – Standard Deviation ; PE - Price-to-earnings ratio; PB – Price-to-book ratio; dma – daily moving averages

Sentiment
24
Primary market activity in CY17 was highest in
more than a decade
Amount raised via QIPs was at record high in CY17; but
no. of QIP transactions was significantly below peak
Source : IIFL Research, Data as of Dec 2017; QIP – Qualified institutional placement; *CY17 listings until 18‐Dec‐2017; Count – Number of issuances
0
50
100
150
200
250
0
400
800
1,200
1,600
2,000
CY07 CY09 CY11 CY13 CY15 CY17*
Rs. bn (LHS) Count (RHS)Primary Issuances
0
15
30
45
60
75
0
50
100
150
200
250
300
350
400
450
500
Rs. bn (LHS) Count (RHS)
QIP Issuances

Sentiment
25
IPO issuances are also
at a decade high
SME IPOs have also picked up in
the last couple of years
Source : IIFL Research, Data as of Dec 2017; SME – Small and Medium Enterprises ; *CY17 listings until 18‐Dec‐2017; Count – Number of issuances, IPO – Initial Public Offer
0
25
50
75
100
125
0
100
200
300
400
500
600
700
800
900
1,000
Rs. bn (LHS) Count (RHS)IPO Issuances
0
15
30
45
60
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Rs. bn (LHS) Count (RHS)SME IPO Issuances

Sentiment
26
Central government was also on a capital
raising spree
~40% of capital raised in CY17
was in the form of IPOs
139
240
158
243 240
462
524
0
100
200
300
400
500
600
FY12
FY13
FY14
FY15
FY16
FY17
FY18*
Disinvestments(Rs. bn)
IPO
40%
QIP
24%
Other
Secondary
Share
Offering
33%
Rights
3%
Share in
capital raised
(CY17*)
Source : IIFL Research, Data as of Dec 2017 ; IPO – Iniital Public Offer; FY 18*- ; *FY18 data until 18‐Dec‐2017; *CY17 listings until 18‐Dec‐2017, QIP - Qualified institutional placement

0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.10
0.11
0.12
0.04
0.09
0.14
0.19
0.24
0.29
0.34
Nov-99
May-00
Nov-00
May-01
Nov-01
May-02
Nov-02
May-03
Nov-03
May-04
Nov-04
May-05
Nov-05
May-06
Nov-06
May-07
Nov-07
May-08
Nov-08
May-09
Nov-09
May-10
Nov-10
May-11
Nov-11
May-12
Nov-12
May-13
Nov-13
May-14
Nov-14
May-15
Nov-15
May-16
Nov-16
May-17
Nov-17
MF AUM to bank deposit MF equity scheme AUM to bank deposit (RHS)
Sentiment
Source : RBI, Anand Rathi Research, NSDL; Data as of Nov 2017
Trend of shift from bank deposit to Mutual Fund
27

450
475
500
525
550
575
600
625
650
Jan-16
Apr-16
Aug-16
Nov-16
Feb-17
Jun-17
Sep-17
Dec-17
FY18 Nifty EPS Estimate
Trigger
28
FY17 FY18E FY19E
Consumer Discretionary (4.7) 18.1 31.4
Consumer Staples 8.5 13.3 19.9
Energy 22.4 6.7 14.5
Financials 26.5 21.0 36.0
Health Care 8.2 (13.5) 30.2
Industrials 21.5 11.9 22.4
Information Technology 5.7 1.7 8.6
Materials 47.1 82.0 29.1
Real Estate 27.6 (42.9) 56.5
Telecommunication Services (49.8) (69.0) 238.1
Utilities (7.3) 29.0 17.9
BSE200 Index 13.4 15.7 24.1
BSE200 Ex-PSU Banks, Metals 7.7 10.3 21.0
Nifty FY18 consensus EPS has been stable
for last two months
BSE200 consensus earnings growth
Source : IIFL Research, Data as of Dec 2017 ; E – Estimated; Past performance may or may not be sustained in the future; BSE 200 – S&P BSE 200 Index, EPS – Earnings Per Share
Rs
.

Factors indicate markets yet to peak
29
`
• High P/B
• Market Cap / GDP
more than 100.
Market Valuation
• High corporate earnings
Trigger
`
Business Cycle
• High Capacity Utilization
• Large Capex Announcements
• High Credit Growth
• Buoyant Economy
• A particular theme receiving
highest inflows.
• Asset Allocation is forgotten.
Sentiment

Triggers for equity outlook in 2018
30
2018
Triggers
Corporate
Earnings
Union
Budget
FY19

Equity Market View
31
• Union Budget for FY19 would be a key event to watch out for, as it could shape views for the rest of the
year.
• Some of the parameters in our checklists are close to their highs. Therefore, our view is that investors
should not invest aggressively in one asset class, and instead a focused approach to asset allocation should
be pursued.
• Corporate earnings are expected to pick up in the coming quarters, backed by an improvement in capacity
utilization, pick up in credit cycle and the government’s continued thrust towards growth.
• Further, global risks, emanating from geopolitical tensions and volatile oil prices, and domestic risks like
state election results and government’s execution of various reforms could also impact the markets.
• We believe investors should continue to practice Asset Allocation, and could stick to largecap companies for
the next two years in equities.
• For staggered investments, investors can consider SIP/STP in asset allocation schemes, largecap oriented
schemes and schemes which benefits from value investing.

Risks to equity outlook in 2018
32
2018
Risks
Heightened
Geopolitical
Tensions
State Elections Budget Risks
Scaling back of
bond-buying
program by
Developed
Economies

Equity valuation index
33
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 GDP ratio. G-Sec – Government
Securities. GDP – Gross Domestic Product; EIF – ICICI Prudential Equity Income Fund; BAF – ICICI Prudential Balanced Advantage Fund; Dynamic – ICICI Prudential
Dynamic Plan; Balanced – ICICI Prudential Balanced Fund
Our equity valuation index
indicates that investors could
consider investing in asset
allocation schemes.
Investors looking to invest in
diversified equity schemes
could invest in large-cap
oriented schemes. Investors
with high risk appetite could
invest in thematic schemes
encompassing infrastructure
sector and export and services
sectors.
115.32
50
70
90
110
130
150
Multicap Schemes
Midcap Schemes
Dynamic/Balanced
EIF/BAF
Stay Invested
Book Partial Profits
None of the aforesaid recommendations are based on any assumptions. These are purely for reference and investors are requested to consult their financial advisors before investing

Fixed Income Outlook
“Successful investing takes time, discipline and patience. No matter
how great the talent or effort, some things just take time.”
– WARREN BUFFETT

10-year G-sec yield movements
35
5.8
6.0
6.2
6.4
6.6
6.8
7.0
7.2
7.4
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Two MPC member
highlights chances
of rate-hike
Weather bureau
predicts normal
monsoon
RBI surprises
by narrowing
the policy
corridor
RBI surprises by
canceling bond sale
worth Rs 10,000 crore
RBI cuts rates
by 25 bps
Govt announces bank
recapitalization programme
for Rs 2.1 lakh crore
10-yearG-Secyield(%)
WPI - Wholesale Price Index; CPI – Consumer Price Index; bps: Basis points; MPC: Monetary Policy Committee; Source: CRISIL Research, ; Data as of Dec 29, 2017; Past
performance may or may not be sustained in the future
Govt announces
additional
borrowing of Rs
50,000 crore
GST tax rate
change
Good growth
inflation mix –
with no rate cut
Concerns on fiscal
slippages and below
par GST revenue
Inflation eases
below 2%
Disinflation
begins
RBI changes
its stance to
neutral
Govt. sticks to
a prudent
budget
WPI and CPI
converges

-6
-4
-2
0
2
4
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
2010 2011 2012 2013 2014 2015 2016 2017
USDBn
%
FII Investment (Debt), rhs 10yr G-sec - 10yr UST
Taper
tantrum
Difference between 10 yr G Sec
and 10 yr UST
FII investment (debt) with G-Sec movement
36
Source: Deutsche Bank Research, NSDL; Data as of Nov 30 2017; UST – United States Treasury; G-Sec – Government Securities; FII – Foreign Institutional Investors ; Past performance may or
may not be sustained in the future

Yield movements
37
5.6
5.8
6
6.2
6.4
6.6
6.8
7
7.2
7.4
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-173-month T-bill 1-yr T-bill 10-yr G-sec
6.4
6.6
6.8
7
7.2
7.4
7.6
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
3-month CP rates 6-month CP rates 1-yr CP rates
Source: CRISIL Research; Data as of Nov 30 2017; Past performance may or may not be sustained in the future
In %
In %

Inflation
38
Source: MOSPI; Data as of Nov 30 2017
-2
0
2
4
6
8
10
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
CPI Combined CPI Food & Beverages
%
Inflation is expected to be
in the range of 4 – 5% in
the medium term. In the
last few months, inflation
has started to inch up
again due to higher food
inflation.
`

Fiscal Deficit
39
Government has shown a strong
resolve in the last few years to stay on
the path of fiscal consolidation, an
effort which was finally rewarded with
a ratings upgrade by Moody’s.
Having said that, concerns on fiscal
slippages have risen due to GST
revenue stress and reform measures
like bank recapitalization program.
-10
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18F
Central govt. fiscal balance Consolidated
% of GDP
Consolidated refers to Central and Stat Govt. Fiscal balance. Source : CEIC, Budget Documents, Deutsche Bank Research, Data as of Nov 2017; F - Forecast
DEFICIT
`

Current Account Deficit (CAD)
40
Current account
deficit could rise to
1.5 -1.75% of GDP
in FY18.
This could be led
by volatility in oil
prices, rupee
overvaluation, lack
of significant
export, and lower
remittances.
0
1
2
3
4
5
0
30
60
90
120
150
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18F
USD bn
CAD, USD bn, lhs CAD, % of GDP, rhs
% of GDP
Source : CEIC, Budget Documents, Deutsche Bank Research; F – Forecast;

0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Credit Growth Deposit Growth
Uptick in credit growth
41
Demonetisation
Phase
Remonetisation Phase
Deposit growth started
moving up initially
flushed with liquidity
led by demonetization.
Post remonetisation
credit growth has now
started outpacing
deposit growth.
Source : CEIC, RBI, Morgan Stanley Research

Triggers for Fixed Income Outlook in 2018
42
2018
Triggers
Direction of
oil prices
Global
growth
Budget
RBI’s
behavior
towards
inflation

Fixed Income View
43
• Union Budget 2018 would be a key event to watch out for, as it could shape views for the rest of the
year.
• We would like to adopt a ‘wait-and-watch’ approach, and closely monitor movement in crude oil prices,
and the government commitment towards fiscal consolidation in 2018.
• Accrual strategy at this juncture looks attractive due to better carry.
• We have a neutral stance on yields and recommend investors to take exposure in short-to-medium
duration schemes, as the same seems to provide favourable risk-reward benefit.
• Investors who want to benefit from the volatility could consider investing in Dynamic Duration
Schemes.

Risks to fixed income outlook 2018
44
2018
Risks
Higher Fiscal
Slippages
Sharp uptick
in Crude Oil
price
Rise in
Current
Account
Deficit
Credit
Growth
picking up

Debt valuation index
45
We recommend
investors to invest in
Dynamic Duration
schemes such as ICICI
Prudential Long Term
Plan, a model-based
scheme that has the
flexibility to change
duration stance.
Investors looking for
reasonable returns
could consider investing
in schemes following
Accrual strategy.
4.0
1
2
3
4
5
6
7
8
9
10
Ultra Low Duration
Low Duration
Moderate Duration
High Duration
Aggressively in
High Duration
Debt Valuation Index considers WPI, CPI, Sensex YOY returns, Gold YOY returns and Real estate YOY returns over G-Sec yield, Current Account Balance and Crude Oil
Movement for calculation. WPI – Wholesale Price Index; CPI – Consumer Price Index. 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.

Why asset allocation matters
46
Growth of Rs 1,00,000 Standard Deviation
Investment started
in beginning of the
year
Years of
Investment
Till 2017
One-time
allocation#
Asset
Allocation*
One-time
allocation#
Asset
Allocation*
2003 14 6,79,337 7,03,224 0.26 0.20
2004 13 4,40,305 4,88,791 0.24 0.19
2005 12 4,03,417 4,56,064 0.24 0.20
2006 11 3,18,153 3,69,139 0.23 0.21
2007 10 2,48,500 2,91,432 0.21 0.21
2008 9 1,88,232 2,16,858 0.17 0.21
2009 8 2,98,861 3,03,214 0.18 0.17
2010 7 1,96,451 2,01,182 0.11 0.11
*Asset Allocation rebalanced to 60% equity (Nifty 50) – 40% debt (Crisil Composite Bond Fund index) at the beginning of each year; #One-time Allocation – 60% equity (Nifty
50) and 40% debt (Crisil Composite Bond Fund index) at the start of the investment period. Past performance may or may not sustain in future. The above is for illustrative
purpose only.
Standard deviation is a statistical measure of the range of an investment's performance. When a mutual fund has a high standard deviation, its means its range of performance is wide, implying greater
volatility.
Assumptions: An investment of
Rs 1,00,000 is split as Rs 60,000 and
Rs 40,000
Explanation - One-Time Allocation:
Rs60,000 is invested in Nifty50 and
Rs 40,000 into Crisil Composite
Bond Fund Index at start of the year
mentioned.
The cumulative returns of the same
is presented at the end of Dec 2017.
Explanation - Asset Allocation:
Rs60,000 is invested in Nifty50 and
Rs40,000 in Crisil Composite Bond
Index at the start of the year. The
value of the investment is
rebalanced each year at the
beginning in the ratio of 60:40
(equity:debt).

Recommendation – Asset Allocation
47
ICICI Prudential
Equity Income
Fund
ICICI Prudential
Balanced
Advantage Fund
ICICI Prudential
Balanced Fund
ICICI Prudential
Dynamic Plan
These schemes
aim to benefit
from volatility and
may be suitable
for investors
looking for equity
exposure with
relatively low risk
appetite.

Recommendation for Asset Allocation
48
ICICI Prudential
Focused Bluechip
Equity Fund
ICICI Prudential
Long Term Plan
ICICI Prudential
Multicap Fund
ICICI Prudential
Savings Fund
ICICI Prudential
Top 100 Fund
ICICI Prudential
Corporate Bond
Fund
The scheme invests in large-
cap stocks.
It follows a benchmark
hugging approach.
The scheme invests in stocks
across market capitalisations
The scheme invests
predominantly in largecap
stocks and also takes tactical
exposure to midcap stocks
The scheme maintains its
duration level between 1 and
10 years, based on an in-house
model.
The scheme maintains a low
duration and seeks to generate
accrual income with low mark-
to-market risk.
The schemes follows a Hold-
Till-Maturity approach
Equity
FixedIncomeThe asset allocation and investment strategy will be as per the Scheme Information Document;

Recommendation – Equity Schemes
49
ICICI Prudential
Value Discovery
Fund
ICICI Prudential
Exports and Other
Services Fund
ICICI Prudential
Infrastructure
Fund
The scheme follows a value investment style. It invests in
diversified portfolio that are quoting at a discount to their
fair/intrinsic value.
These thematic schemes are for investors looking for
exposure to particular themes.
The asset allocation and investment strategy will be as per the Scheme Information Document

Recommendation – Fixed Income Schemes
50
ICICI Prudential Short
Term Plan
ICICI Prudential Regular
Savings Fund
ICICI Prudential Regular
Income Fund (Income is not
assured and is subject to the
availability of distributable
surplus.)
The scheme invests with the aim to maintain a short-to-
medium duration
Hold till maturity approach with focus on accruals
Takes researched credit calls
The asset allocation and investment strategy will be as per the Scheme Information Document

Key Events: India & the World in 2018
51
US Federal Reserve’s
rate action, tax
reform action
Mexico
General
Elections
European Central
Bank’s monetary
stimulus action
Brazil
Presidential
Election
UK-Britain agreement
for Brexit deal
Elections
in Italy
Russian
Presidential elections
Bank of Japan’s
rate action
State
elections in
Karnataka,
Madhya Pradesh,
and Rajasthan
Expect sustenance of
the cut in oil production
Signs of a
housing bubble
South African
economy in
recession

ICICI Prudential Dynamic Plan is suitable for investors who are seeking*:
 Long term wealth creation solution
 A diversifed equity fund that aims for growth by investing in equity and debt (for defensive considerations)
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
Riskometers
ICICI Prudential Balanced Fund is suitable for investors who are seeking*:
 A balanced fund aiming for long term capital appreciation and current income by investing in equity as well as fixed
income securities.
ICICI Prudential Balanced Advantage Fund is suitable for investors who are seeking*:
 An equity fund that aims for growth by investing in equity and derivatives.

Riskometers
ICICI Prudential Focused Bluechip Equity Fund is suitable for investors who are seeking*:
 A focused large cap equity fund that aims for growth by investing in companies in the large cap
category
*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*:
 A diversified equity fund that aims to generate returns by investing in stocks with attractive
valuations
them
ICICI Prudential Top 100 Fund is suitable for investors who are seeking*:
 An equity fund that aims to provide long term capital appreciation by predominantly investing in
equity and equity related securities.
them

ICICI Prudential Exports and Other Services Fund is suitable for investors who are seeking*:
 An equity fund that aims for growth by predominantly investing in companies belonging to the service industry.
Riskometers
ICICI Prudential Equity Income Fund is suitable for investors who are seeking*:
 An equity 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.
ICICI Prudential Multicap Fund is suitable for investors who are seeking*:
 A growth oriented equity fund that invests in equity and equity related securities of core sectors and associated
feeder industries.

Riskometers
ICICI Prudential Infrastructure Fund is suitable for investors who are seeking*:
 An equity fund that aims for growth by primarily investing in securities of companies belonging to
infrastructure and allied sectors.
ICICI Prudential Savings Fund is suitable for investors who are seeking*:
 Short term savings solution
 A debt fund that invests in debt and money market instruments of various maturities with an aim to maximise
income while maintaining an optimum balance of yield, safety, and liquidity.
ICICI Prudential Technology Fund is suitable for investors who are seeking:
 An equity fund that predominantly invests in equity and equity related securities of technology and technology
dependent companies.

Riskometers
ICICI Prudential Regular Savings Fund is suitable for investors who are seeking*:
 Medium term savings solution
 A debt fund that aims to deliver consistent performance by investing in a basket of debt and money market
instruments with a view to provide reasonable returns while maintaining optimum balance of safety, liquidity
and yield.
ICICI Prudential Corporate Bond Fund is suitable for investors who are seeking*:
 Long term savings solution
 A debt fund that invests in debt and money market instruments of various maturities with a view to maximise
income while maintaining optimum balance of yield, safety and liquidity.
ICICI Prudential Regular Income Fund (An open-ended income scheme. Income is not assured and is subject to the
availability of distributable surplus.) This scheme is suitable for investors who are seeking*:
 Medium 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.

Riskometers
ICICI Prudential Short Term Plan 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 Long Term Plan is suitable for investors who are seeking*:
 Medium term savings solution
 A Debt Fund that invests in debt and money market instruments with a view to maximise income while
maintaining optimum balance of yield, safety and liquidity.

Disclaimer for Mutual Funds
Mutual Fund investments are subject to market risks, read all scheme related documents
carefully.
All figures and other data given in this document are dated. The same may or may not be relevant at a future date. The AMC takes no responsibility
of updating any data/information in this material from time to time. The information shall not be altered in any way, transmitted to, copied or
distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Prudential
Asset Management Company Limited. Prospective investors are advised to consult their own legal, tax and financial advisors to determine possible
tax, legal and other financial implication or consequence of subscribing to the units of ICICI Prudential Mutual Fund. Past Performance may or may
not be sustained in future.
Disclaimer: In the preparation of the material contained in this document, ICICI Prudential Asset Management Company Ltd. (the AMC) has used
information that is publicly available, including information developed in-house. The stock(s)/sector(s) mentioned in this slide do not constitute any
recommendation and ICICI Prudential Mutual Fund may or may not have any future position in this stock(s). 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. ICICI Prudential Asset Management Company Limited (including its affiliates), the Mutual Fund, 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. Further, the information
contained herein should not be construed as forecast or promise or investment advice. The recipient alone shall be fully responsible/are liable for
any decision taken on this material.

Solution to the puzzle (theme of the presentation)
59
11.
C
4. A
U 7. T 15.
2. P F A M
B G I L 13. A
A R S O O C
N A C 9. N K R
1. K 3. D 5. 6. A 8. D 10. I 12. H 14. O
A S S E T A L L O C A T I O N
C N E M A R A P
C A L A R E P E
R P E Z G D E C
U D C O E I R
A E O N C T I
L A M A N
L P G

Market Outlook 2018 - ICICI Prudential Mutual Fund

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