Download - Life needs balance. So do your investments
Life needs balance. So do your investments
HSBC Equity Hybrid Fund | NFO open from: 28 Sep - 12 Oct 2018
1
Where are we today?Above average equity valuations + Attractive bond yields + Political uncertainty
Current equity valuations and bond yields call for a balanced approach
10
0
12
29
6
24
5
-2
11
2
8 9
19
5
-6
-12
-1
0
-7
1
-3 -3
7 7
-8
1514
5
10
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
FY12 FY13 FY14 FY15 FY16 FY17 FY18
7.8%
55.5
66.5
77.5
88.5
99.510
Jan
-09
Ap
r-09
Jul-
09
Oct-
09
Jan
-10
Ap
r-10
Jul-
10
Oct-
10
Jan
-11
Ap
r-11
Jul-
11
Oct-
11
Jan
-12
Ap
r-12
Jul-
12
Oct-
12
Jan
-13
Ap
r-13
Jul-
13
Oct-
13
Jan
-14
Ap
r-14
Jul-
14
Oct-
14
Jan
-15
Ap
r-15
Jul-
15
Oct-
15
Jan
-16
Ap
r-16
Jul-
16
Oct-
16
Jan
-17
Ap
r-17
Jul-
17
Oct-
17
Jan
-18
Ap
r-18
Jul-
18
10 year G-Sec yield
Source: Bloomberg, MOSL, August 2018
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
Price to Earnings - Nifty Nifty PAT Growth %
2
Equity has proven to be one of the best asset classes for long-term wealth creation.
– S&P BSE Sensex has returned 14% annualised returns, on an average, for a 20-year holding period on a daily rolling basis
Equity offers long-term wealth creation opportunity
Source: BSE
Annualised returns of S&P BSE Sensex on a daily rolling basis since July 1979, Data as on July 2018
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
Equity performance over a long term
Equity delivered an average of 14% returns over a long-term period
17%16% 16%
15%14%
15% 16%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
3-Years 5-Years 10-Years 15-Years 20-Years 25-Years 30-Years
Annualis
ed r
etu
rns %
Average rolling returns
----------------------------------------------------------------------------Holding Period---------------------------------------------------------------------------------
3
Equity provides a wealth-creation opportunity over the long term, but can erode wealth in the short term owing to
volatility. Therefore, it is prudent to go long.
Volatility exists in the short run
Source: BSE
Annualised returns of S&P BSE Sensex for the above holding periods are on a daily rolling basis between June 2003 to July 2018
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
Long-term investing increases the likelihood of better performance because of the power of compounding and
shields the portfolio against short-term market fluctuations.
Longer investment horizon helps reduce volatility
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
Jul-
03
Jul-
04
Jul-
05
Jul-
06
Jul-
07
Jul-
08
Jul-
09
Jul-
10
Jul-
11
Jul-
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Jul-
13
Jul-
14
Jul-
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Jul-
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Jul-
17
Jul-
18
An
nu
alis
ed
re
turn
s %
1-years rolling
5-years rolling
10-years rolling
4
Short term volatility can be reduced too
Fixed Income complements equity and provides strength to the portfolio
Extreme volatility of
equity can reflect
temporary erosion of
investment
Fixed Income asset
class provides stability
even in the short term
Exposure to both asset
classes reduces the
short term volatility and
provides the right
balance to the portfolio
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
5
Every season the winner changes hands in the financial markets.
• Asset classes (equity and debt) perform differently under different market situations.
• Dependency on a single asset class could be risky and instead, diversification helps minimise potential losses.
• Allocation to different asset classes is dependent on an investor’s investment objective and risk profile.
• As evident in the chart above, equity (S&P BSE Sensex) nosedived 52% while debt (Crisil Composite Bond Fund Index) rose 9% in
2008, while in 2017, the S&P BSE Sensex surged 28% while the composite bond fund index rose just 5%.
Different seasons have different winners
Debt and equity are represented by the Crisil Composite Bond Fund Index and S&P BSE Sensex respectively,
Source: CRISIL Research, BSE, * data till 31 July 2018, Equity – Debt Correlation is calculated using 10 years daily returns data for Sensex TRI and Crisil Composite Bond Fund Index.
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
Equity
Equity Equity Equity Equity
Equity
Equity Debt Debt DebtEquity Equity Equity Equity EquityDebt
Diversification helps minimise losses and get the best of both asset classes
8%
-0.3%
5% 4% 7% 9% 4% 5% 7% 9% 4%14% 9% 13%
5% 1%
73%
13%
42% 47% 47%
-52%
81%
17%
-25%
26%
9%
30%
-5%
2%
28%
10%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8*
RE
TU
RN
S %
Debt Equity
Equity - Debt
Correlation = 0.13
6
E 20% – D 80%
E 30% – D 70%
E 35% – D 65%
E 50% – D 50%
E 65% – D 35%
E 70% – D 30%
E 80% – D 20%
Debt
Equity
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0% 5% 10% 15% 20% 25%
Retu
rns
Risk
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
Above list of asset allocation patterns is not exhaustive and only for illustration purpose
E –(Equity) S&P BSE 200 TRI and D (Debt) CRISIL Composite bond fund index, Equity – S&P BSE Sensex, Debt – Crisil Composite Bond Fund Index,
Risk – return chart for 15 years with daily rolling returns data till the period ended 31 July 2018 , Risk – Standard deviation
Optimal asset allocation for wealth generation
Right asset allocation is the key to an ideal portfolio
Potential additional risk
to generate returns
7
• With appropriate asset allocation between equity and debt, benefits of diversification can be seen, particularly in the
market downtrend.
• The analysis below shows that during bear phases, Portfolio B (70% equity and 30% debt) has performed better as
compared with Portfolio A (100% equity).
Portfolio Allocation A represented by S&P BSE Sensex TRI Index
Portoflio Allocation B represented by S&P BSE 200 TRI Index (70% weightage) and CRISIL Composite Bond Fund Index (30% weightage)
Annualised returns on point to point basis is considered
Source: CRISIL Research, For illustration purpose only
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
PeriodPortfolio A returns
(equity 100%)
Portfolio B returns (equity 70% and debt 30%)
Sub-prime crisis (Jan 2008-Mar 2009) -44% -35%
Sharp bounce back post sub-prime crisis (Apr 2009-Dec 2010) 54% 38%
European crisis (Jan 2011-June 2013) -1% 1%
Post European crisis (Jul 2013-Feb 2015) 29% 25%
Chinese slowdown (Mar 2015-Feb 2016) -21% -12%
Global liquidity and domestic reforms (Mar 2016-Dec 2017) 24% 22%
Optimal asset allocation best suited for long-term investors
Right allocation across asset classes helps achieve better risk-adjusted returns
Presenting,
HSBC Equity Hybrid Fund (HEHF)(Aggressive Hybrid fund – An open ended hybrid scheme investing predominantly in equity and equity related instruments)
NFO Period
28 September - 12 October 2018
9
An open ended aggressive hybrid scheme
An asset allocation product with a mix of equity & debt
Benefit from growth potential of equities
Benefit from lower or reduced risk/volatility due to debt exposure
A solution for long term wealth creationHSBC Equity Hybrid Fund
Asset allocation of aggressive hybrid funds as per SEBI’s new category reclassification.
For representation purpose only, * The provision for equity investments is between 65% to 80% and debt between 20% to 35%. The investment list above is not exhaustive and for illustration purpose only
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
Get upside potential of equities with relatively lower risk
70%
30%
Investment in equity
and equity-related
instruments -
between 65% and
80% of total assets *
Investment in
debt instruments -
between 20% and
35% of total assets *
10
Fund placement in potential risk-reward matrixStriking the right balance in between
Source – HSBC MF, Note - Above list of categories in the chart is an indicative list and is not exhaustive #Typical minimum investment horizon for investors, *There were 2 instances on July 16, 2013 and July 24, 2013 when the liquid funds gave negative one-day return due to tightening of liquidity by RBI1 An open ended debt scheme investing in instruments with Macaulay duration between 4 to 7 years 2 An open ended debt scheme investing in government securities across maturity3 An open ended short term debt scheme investing in instruments with Macaulay duration between 1 year and 3 years
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
RE
TU
RN
Liquid Funds #
Short Duration Funds 3
Gilt Funds 2
RISK
Long Duration Funds 1
HSBC Equity Hybrid Fund
Dynamic Bond Funds
Large Cap Funds
Mid and Small Cap Funds
Thematic Funds
HSBC Equity Hybrid fund is placed at a mid level of risk-return ratio
11
HEHF’s investment approachAsset allocation strategy with right balance between equity & debt
Data as of 31 July 2018
Optimal asset allocation – exposure to two different asset classes to strike
the right balance between Growth & Stability
Flexi-Equity strategy - sector agnostic style of investments with a flexi-cap
strategy to build a diversified portfolio using PBROE valuation framework
Optimal-Duration strategy - to follow an optimal duration debt strategy and
invest in high quality fixed income instruments which offer reasonable yields
Flexible in approach, higher on growth, lower on risks
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
12
Why flexi-cap equity strategy?Capitalising on the opportunities across the market spectrum
Performance
Flexi cap strategy can invest across market spectrum depending on prevailing opportunities which can
provide performance consistency
Volatility
Ability to maintain portfolio volatility at reasonable level due to a balance between large, mid and small cap
stocks
Under researched
Mid & small caps may be subject to mis-appraisals and mis-pricing as they are under researched and thus
can create an alpha generation opportunity for the fund manager
Earnings
It offers a combination of stable as well as accelerated earnings with a potential to support stock valuations in
up as well as down trend
Growth
While large cap companies are well positioned to achieve economies of scale, mid & small cap companies
offer higher growth push
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
13Source - MFI ICRA, HSBC Global Asset Management , data as of 31 Dec 17
Different market-caps perform in different investment scenarios
Bringing performance consistencyFlexi-cap strategy can outperform in different time periods
– Large cap stocks were the leaders in 2006, 2008, 2010, 2011 & 2013
– Midcap stocks shone in 2012, 2015 & 2016
– Small cap stocks were the best performers in the year 2005, 2007, 2009, 2014 & 2017
-100.0
-50.0
0.0
50.0
100.0
150.0 Large Cap
Mid Cap
Small Cap
2005 2007 20102011
2013 2015 20172006
2008
2009 2012 2014 2016
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
14
How do we construct a portfolio?Placement of stocks through proprietary PBRoE process makes it more efficient
Inflated Buy Growth Buy
Value Buy Best Buy
RoE of stocks
PB
of
sto
cks
Underweight / Overweight position of market cap segments
For illustrative purposes only
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
15
Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
Potential opportunities in equityFlexi cap strategy
Large cap
There is a concentrated performance on a YTD basis in Large Cap indices and there could be a case for
wider participation going forward.
Mid & Small cap
This segment continues to be more bottom up and a sharp correction in mid & small cap names this year is
throwing up some investment opportunities that are now available at more reasonable valuations.
Investment style
Flexi strategy offers potential quality mix of large, mid and small cap stocks in the portfolio without exposure
to excessive risk. The fund aims to invest across value, growth and market capitalisations.
16
Sector Category Rationale
Financials O/w • Private banks & select NBFCs • Shift in market share away from PSBs
Materials O/w • Metals (both ferrous and non-ferrous)• Expectations of deleveraging amongst India based companies
due to improved cash flows and capacity reduction in China
Consumer
DiscretionaryO/w
• Auto & Auto ancillaries, Hospitality, select names in
Home improvement and Consumer goods
• Focus on improving rural income, farmer welfare and the
masses in general, should aid overall consumption
Industrials O/w • Construction, EPC and building materials
• The outlook for Infrastructure sector remains positive with
expectations of pick up in activities and increased allocation of
government resources
Telecom E/w • Companies where bulk of the capex is behind• Industry should see the benefits of consolidation coming
through gradually
Information
TechnologyU/w
• Prefer companies driven by higher revenue visibility,
ability to adapt to industry disruptions and relative
valuations
• Higher revenue visibility, ability to adapt to industry disruptions
and relative valuations
Energy U/w• Project commissioning in the private / downstream
refiners• Potential to improve asset turns and return ratios
Consumer
StaplesU/w • Stocks with attractive valuations
• Underlying growth trends remains moderate and the valuations
continue to remain expensive
Healthcare U/w
• Prefer stocks with relatively higher growth, lower
dependence on select drugs to drive revenues and the
ones with lesser US FDA related concerns
• Relatively higher growth, lower dependence on select drugs to
drive revenues, fair valuations and the ones with lesser degree
of US FDA related concerns
Utilities U/w • Public sector companies• Reasonable visibility of growth and are suffering from poor
capital allocation
Focus themes in equityOpportunities across sectors
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
O/w – Over weight, U/w – Under weight, E/w – Equal weight, as at August 2018
17
Why optimal duration strategy?Freedom to position the portfolio favorably
Performance
Potential to capture the superior risk adjusted performance due to flexibility to move allocation towards
favorable duration instruments
Volatility
Potential to avoid extreme risks as the fund manager would aim to reduce duration in a volatile
environment
Risk
Ability to avoid extreme risk as FM has a flexibility to position a portfolio in the favorable short-mid-long
durations
Quality
Investments in better rated credit quality instruments that generally have low capital risk
Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
18
Potential opportunities in debtOptimal duration strategy
Corporate bonds
Corporate bond segment is expected to move in tandem with G-Secs
There are pockets of better spreads opportunities. 6 months to 3 year corporate bond segment with over 200
bps over repo rate seems to have priced more than one rate hike by RBI.
5 year average spread is at 130 bps
Going forward and therefore offers good carry with favorable risk reward.
Investment style
Investors are saved from the predicament on whether they should invest in long bond or short bond oriented
funds as the fund manager manages the portfolio composition based on the interest rate cycle.
Data as at August 2018
Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
6.84 7.08 7.50
7.83 7.97 8.06 8.10 8.12 8.20 8.16 8.17 8.02 8.35
7.34 7.61
8.41 8.74 8.75 8.88 8.91 8.88 8.83 8.81 8.84 8.79 8.87
6.00
7.00
8.00
9.00
10.00
3M 6M 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y
Yield Curve %
Government of India Yield PSU AAA Corporate Yield
19
Who should invest in HEHF?Suited for all types of investors
Cautious - New to equity
HEHF is well suited for investors with no equity exposure due to volatility associated with
equity asset class. HEHF can provide higher return potential with lesser volatility.
Moderate – Measured equity exposure
HEHF is well suited for an informed investor who is looking for adequate exposure to equities
at lesser risk
Disciplined – Balanced approach
HEHF is best suited for investors looking for a cost effective and optimal asset allocation
product
Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
20
Aggressive hybrid portfolio - as represented by the S&P BSE 200 TRI Index (70% weightage) and CRISIL Composite
Bond Fund Index (30% weightage) – has been at par with equity (S&P BSE Sensex TRI ) and has outperformed debt
(CRISIL Composite Bond Fund Index) across all timeframes.
HEHF provides wealth-building opportunityPrudent asset mix offers comparative risk adjusted performance across all timeframes
Source: BSE, CRISIL Research
Aggressive hybrid portfolio represented by the S&P BSE 200 TRI Index (70% weightage) and CRISIL Composite Bond Fund Index (30% weightage), equity by the S&P BSE Sensex TRI and debt by the
Crisil Composite Bond Fund Index
Point to point returns for the period ended 31 July 2018
Mutual fund investments are subject to market risks, read all scheme-related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
Performance of aggressive hybrid portfolio
Higher equity allocation could help achieve growth and increase the potential
of beating inflation in longer timeframes
11%
15%
12%11%12%
16%
13%12%
8%
9%8%
8%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
3 years 5 years 7 years 10 years
An
nu
alis
ed
re
turn
s %
Aggressive Hybrid Portfoio
Equity
Debt
21
Why should you invest in HEHF?To be a disciplined investor
Optimal asset allocation
Get exposure to two asset classes in one fund which are not just different, but
complementary
Asset rebalancing
Maintain the desired asset allocation level in your portfolio with asset rebalancing
Dual advantage
Grow your investments with equity and stabilise the volatility with debt
Magical tax effect
Switching between both asset classes for the desired asset allocation portfolio has no tax
incidence #
Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance # HEHF invest and rebalances portfolio within equity and debt asset class. HEHF has equity fund status and subject to equity taxation.
22
Fund Name HSBC Equity Hybrid Fund
BenchmarkA customized index with 70% weight to S&P BSE
200 and 30% weight to CRISIL Composite Bond
Fund Index.
Minimum
Application
Amount
Rs 5,000/- per application and in multiples of Re. 1/-
thereafter
Minimum
Application
Amount
(SIP)
Minimum Investment Amount - Rs. 1000 (monthly)
or Rs. 3000 (quarterly);
Minimum no. of instalments - 12 (monthly) or 4
(quarterly);
Minimum aggregate investment - Rs. 12,000.
TypeAn open ended hybrid scheme investing
predominantly in equity and equity related
instruments
Plans /
Options /
Sub options
Regular, Direct plans / Growth, Dividend / Payout,
Dividend Reinvestment
Loads
(including
SIP / STP
wherever
applicable)
Entry Load* : Nil
Exit Load:– Any redemption / switch-out within 1
year from the date of allotment:
For 10% of the units: NIL, For remaining units: 1%
If redeemed / switched out after 12 months from the
date of allotment: NIL”
SIP/STP/SWP AvailableFund
Managers
Neelotpal Sahai for Equity
Sanjay Shah for Debt
The exit loads set forth above is subject to change at the discretion of the AMC and such
changes shall be implemented prospectively
*In terms of SEBI circular no. SEBI/IMD/CIR No.4/ 168230/09 dated June 30, 2009, no entry
load will be charged by the Scheme to the investor effective August 1, 2009. Upfront
commission shall be paid directly by the investor to the AMFI registered Distributors based on
the investor’s assessment of various factors including the service rendered by the distributors.
No exit load (if any) will be charged for units allotted under bonus / dividend reinvestment option.
Data as of 31 July 2018
HSBC Equity Hybrid Fund (HEHF)Fund snapshot
To seek long term capital growth and income through investments in equity and equity related securities
and fixed income instruments. However, there is no assurance that the investment objective of the
scheme will be achieved.
23
Market Overview
24Bloomberg, MOSL Wealth Creation Study, as at Dec 2017 – Chart 1, Chart 2 – IMF GDP Projections for 2018
Note - Above forward looking statements are based on external current views and assumptions and involve known and unknown risks and uncertainties that could affect actual results
Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
1.8
6.6
2.2
7.3
1.0
1.7
1.4
2.9
-3.0 2.0 7.0 12.0
Bra
zil
Chin
aE
uro
zon
eIn
dia
Jap
an
Russia
UK
US
IMF GDP Projections for 2018
Corporates across market caps are likely to benefit from GDP expansion
Encouraging signs of equity investmentsIndia GDP estimated - 2024
India’s GDP growth prospects are bright
– Global financial agencies are optimistic about India’s growth prospects. According to World Bank data, India has
now become the world’s sixth-biggest economy
– The International Monetary Fund (IMF) has projected 7.3% growth in 2018 and 7.5% in 2019 for India as against
6.7% in 2017, making it the fastest growing country among major economies
– By 2024 India’s GDP may double from the FY16 levels
25
Bloomberg, MOSL – India Strategy, as at Aug 2018, * On the basis of estimates by MOSL
Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
Strong expectations on corporate earningsNifty EPS – expect reasonable rebound in FY 19-20
Nifty EPS is expected to rebound in FY 19-20 with about 22% CAGR* vs 5% CAGR in FY 08-18
– EPS estimates for Nifty at INR547/688 for FY19/FY20
– Lower base of FY17/18 to aid a sharp rebound in FY19-20
Strong expectations on the equities in FY19/20
73 78 92131
169 184236
281 251 247
315348 369
406 413394
423459
547
688
FY
01
FY
02
FY
03
FY
04
FY
05
FY
06
FY
07
FY
08
FY
09
FY
10
FY
11
FY
12
FY
13
FY
14
FY
15
FY
16
FY
17
FY
18
FY
19E
FY
20E
FY01-08: 21%
CAGR
FY08-18:
5% CAGR
FY19-20E: 22%
CAGR
19%
26%
26
MOSL, Bloomberg – Bulls & Bears, as at August 2018, 12-month forward P/E (x), 12-month forward P/B (x),
Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
Trend in India’s market-cap-to-GDP (%)
Price to Book - SensexPrice to Earnings - Sensex
ROE - Sensex
Equity valuationsReasonably valued cash-rich companies are well positioned in current markets
Moderate valuations in large caps
– Sensex trades at a 12M forward P/E of 20x, at a premium to long-period average of 17.5x
– At 2.9x 12M forward P/B of Sensex is also marginally above its historical average 2.6x
– RoE of the Sensex (forward) stands at 15.0%, around its long-term average of 15.2%
27
Bloomberg, Data as at June 2018
Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not sustain and doesn’t guarantee the future performance
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
Apr-
14
Jun-1
4
Aug-1
4
Oct-
14
De
c-1
4
Feb
-15
Apr-
15
Jun-1
5
Aug-1
5
Oct-
15
De
c-1
5
Feb
-16
Apr-
16
Jun-1
6
Aug-1
6
Oct-
16
De
c-1
6
Feb
-17
Apr-
17
Jun-1
7
Aug-1
7
Oct-
17
De
c-1
7
Feb
-18
Apr-
18
Jun-1
8
FIIs Vs Domestic MF (Equity) (USD bn) FII Equity
Dom MF Equity
Liquidity to support marketsDomestic equity inflows show visible expansion
Equity inflows to keep stocks trending
– India has recorded highest ever inflows by domestic MFs: $14Bn in CY17, 2.6X of CY16
Domestic equity inflows remain reasonably strong in 2018
28
GDP growth rebounds and economic activity normalizing after negative impact of Demonetization
disruption, GST transition and Corporate sector deleveraging wanes.
Government steps to address the growth issues, the bank recapitalization, and infrastructure push will
help in hastening the overall economic growth revival process.
Corporate earnings of Q1FY19 has confirmed rebound in earnings trend with Nifty companies’ revenue
and net profit grew by 24% and 20% respectively, excluding results of SBI and Tata Motors.
Looking ahead, the GST regime will lead to faster formalization of the economy, broaden the tax base,
improve the fiscal situation and improve the ease of doing business.
IBC is another key reform that will lead to structural repair in the banking industry and this may go a long
way in reviving the credit offtake in the economy, signs of which we are already witnessing.
The factors to closely track in the near to medium term would be corporate earnings, RBI’s policy actions,
election calendar culminating in the general elections, global crude price dynamics, rising trend of trade
war and protectionism in the developed economies, and the interest rate actions in the US.
We remain constructive on the India story from a medium to long term perspective.
We remain constructive on the India story from a medium to long term perspective.
Equity market outlookConstructive on India growth story
Expect meaningful acceleration in corporate earnings growth over the next 2 years
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Debt market outlookShort duration funds are favorable
“Neutral” stance on rates indicates a lower probability of further hikes in near term
RBI’s Monetary Policy Committee (MPC) minutes released in the middle of the month was largely on
expected lines.
GST collection continues to remain lower than the INR 1 trillion per month target. The reason has been
cited as postponement of purchases given announcement of lower rates in mid-July. Going forward,
heading into festive season as spending improves, collections are expected to increase.
India Gross Domestic Product or GDP and Gross Value Added or GVA data came in higher than
expectations at 8.2% and 8.0% vis-à-vis expectations of around 7.6% and 6.5% respectively.
RBI has indicated that it would balance liquidity actively with choice of instruments depending on the
whether the action is to tackle durable or transient liquidity.
Going forward any positive movement will be driven by Open Market Operations or OMO announcement,
statements by the government around fiscal balance being maintained, easing of global tensions or
sharp and sustained reversal in oil prices.
10 year G-Sec is likely trade around 7.85 – 8.15 in the near term. In the near term, market will look for
cues from oil prices, direction of currency movement and global cues.
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