equity market outlook_oct 2015
TRANSCRIPT
-
7/23/2019 Equity Market Outlook_Oct 2015
1/24
Equity Market Outlook
October 2015
-
7/23/2019 Equity Market Outlook_Oct 2015
2/24
Equity market suffered losses across the globe
Performance during the month of September (local currency
returns)
Performance in 2015 ytd (local currency returns)
Nifty (-0.3%) managed to outperform MSCI EM index.
Barring Korea and Taiwan, all the market delivered negative
return in the month
France/Korea happen to be the best performing
markets globally YTD.
Indonesia/Taiwan/HK amongst the laggards.
Source: Bloomberg, SBIMF Research
-8-7
-6 -6
-5 -5 -5 -4 -4
-4 -3 -3 -3 -3 -3
-1
0
0
1
-9-8-7-6-5-4-3-2-101
2
JP
PKIST
I
ESI
E
SSI
I
SIE
-E
FSE
SRI
L
K
BR
ZI
SIE
ILI
I
E
S
J
E
IFT
TI KR
E
-19-17
-15-12-11
-10-9 -8 -7
-5 -4 -4 -3 -1 0 0
1 2
5
-25
-20
-15
-10
-5
0
5
10
I
ESI
SIE
SIE
-E T
I SE
I
J
E
S
ILI
I
E
IFT
I
SRI
L
K
EJ S
SI
IST
E
F
-
7/23/2019 Equity Market Outlook_Oct 2015
3/24
Performance of Major Indices in Indian market
Performance during the month of September Performance in 2015 ytd
Source: Bloomberg, SBIMF Research
-8-6
-3 -3 -2
-1 -1 0 0 0 0
0 0 1
4
11
-10
-5
0
5
10
15
ET
L
P
PS T
IL
P
R
BSE10
SE
SE
F
SE
IFT
B
KE
S
LL
P
I
P I
ELESTT
-36
-18
-12 -9 -8
-7 -5 -4 -3
-2 -2 0
1
7 10
22
-40
-30
-20
-10
0
10
20
30
ET
L S
IL
RELESTT
B
KE T
SE
SE
IFT
SE
PBSE50
S
LL F II
P
R
Nifty (-0.3%), Sensex (-0.5%), BSE100 (-0.5%) continued to deliver negative returns in September
Midcap Index (0.6%) and Small Cap index (0.5%) deliveredmarginal out-performance
Banking and Real estate stocks rallied during the month on the back of monetary policy easing, while IT stocks were positively
impacted by rupee depreciation
For the year so far, FMCG, IT and Pharma continue to be the outperformers
-
7/23/2019 Equity Market Outlook_Oct 2015
4/24
On the growth front, both agriculture and manufacturingsectors have their own challenges; but with growthsupportive fiscal and monetary policy, recovery is likely to
sustain
-
7/23/2019 Equity Market Outlook_Oct 2015
5/24
Challenges in agricul ture sector
Monsoon defic it in 2015 at 14% vs. 12% in 2014
Source: IMD, pib.nic.in, SBIMF Research
Sowing in Kharif Season increased by 1.3%
Total sown area as on 1st OctoberCrop Area sown in
2015-16
Area sown in
2014-15 % increase in
2015-16Rice 375.93 375.21
0.2
Pulses 114.58 102.5611.7
Coarse Cereals 183.16 178.442.6
Oilseeds 184.64 178.243.6
Sugarcane 48.84 48.740.2
Jute & Mesta 7.8 8.13-4.1
Cotton 116.41 126.55-8.0
Total 1031.37 1017.861.3
Cumulative rainfall in 2015 was 14% deficient vs. 12% shortfall last year.
The timely onset of monsoon nevertheless, boosted sowing in kharif season (up 1.2%)
As per first advance estimate, the agriculture ministry expects 3.1% growth in food grains output In kharif season
On the contrary, poor reservoir storage (22% below 5 year average) could impact the winter crops adversely.
Growth challenges in agriculture sector and consequently in agriculture income will once again weigh down the rural
consumption demand
-
7/23/2019 Equity Market Outlook_Oct 2015
6/24
Manufacturing activi ty sluggish due to muted demand
Rural consumption indicated by 2&3 wheeler sales is low,
while urban demand (captured by car sales) is holding up
Muted consumpt ion and investment demand leading to
persistent under-utilization o f manufacturing capacity
Source: IMD, CSO, MOSL, PRS legislative, SBIMF Research
Manufacturing activity is lacking a sustained vibrancy. While consumption demand seems to be holding up other than in rural
areas, outlook for investment demand remains lackluster
This slack is evident in muted IIP and core industries growth, persistent under-utilization of capacity and still high stress on
banksbalance sheet
The prospects for exports too appear muted in the view of deterioration in external trading environment.
-30
-20
-10
0
10
20
30
40
50
Aug-10
Nov-10
Feb-11
May-11
Aug-11
Nov-11
Feb-12
May-12
Aug-12
Nov-12
Feb-13
May-13
Aug-13
Nov-13
Feb-14
May-14
Aug-14
Nov-14
Feb-15
May-15
Aug-15
Passenger Cars and Vans 2 & 3 wheelers
% y-o-y 3mma
65
67
69
71
73
75
77
7981
83
85
Jun-09
Oct-09
Feb-10
Jun-10
Oct-10
Feb-11
Jun-11
Oct-11
Feb-12
Jun-12
Oct-12
Feb-13
Jun-13
Oct-13
Feb-14
Jun-14
Oct-14
Feb-15
Jun-15
Capacity utilisation in Manufacturing (%)
-
7/23/2019 Equity Market Outlook_Oct 2015
7/24
The bright spots
-
7/23/2019 Equity Market Outlook_Oct 2015
8/24
Both fiscal & monetary policy supportive of growth, recovery to sustain
Tax and non-tax revenue holds s trong year to date
Page 8Source: cga.nic.in, RBI, SBIMF Research
helping government to front-load capital spending
to crowd i n private investment
35.333.4
31.8
34.5 34.2
38.1
20
25
30
35
40
2010 2011 2012 2013 2014 2015
Capital Spending (cumulative as % of BE)
Cumulative between April-August23.5 23.3 23.0 21.7
29.7
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2011 2012 2013 2014 2015
Revenue receipts (as % BE)
Cumulative between April- August
Buoyed by strong growth in tax and non-tax revenue,
government front loaded its capex spending plans
Cumulative Apr-Aug fiscal deficit at 66% of BE (vs. 75%
last year) remains one of the lowest in 4 years.
This could help government achieve its fiscal deficit
target without compromising the spending plans, even
though disinvestment trends remain weak.
With both fiscal (improving expenditure mix) and
monetary policy (cumulative 125bps easing so far)
turning supportive of growth, recovery is likely to sustain
-5.00
-4.00
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.50
6.75
7.00
7.25
7.50
7.75
8.00
8.25
8.50
8.75
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Real rate (%), RHS Repo rate (%)-LHS
With inflation staying tamed, RBI shifted focus to lift growth
and delivered 50bps cu t in September
-
7/23/2019 Equity Market Outlook_Oct 2015
9/24
Low inflation and softer commodity pr ices improving margin for companies
Source: CMIE Economic Outlook, Bloomberg, PPAC, SBIMF Research
Indian crude basket is as low as 46.1 Rs/barrel from the highs o f 109-110 last year
Lower inflation has started to feed in the form of l ower raw-
material cost
Commodity prices have been declining for a year now
-5
0
5
10
15
Apr-05
Oct-05
Apr-06
Oct-06
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Oct-14
Apr-15
WPI: Headline WPI: Core
% y-o-y
90
110
130
150170
190
210
230
Jan-05
Aug-05
Mar-06
Oct-06
May-07
Dec-07
Jul-08
Feb-09
Sep-09
Apr-10
Nov-10
Jun-11
Jan-12
Aug-12
Mar-13
Oct-13
May-14
Dec-14
Jul-15
CRB Food Index CRB Commodity Index
Jan 2010=100
109.1
47.5
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
110.00
120.00
130.00
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Crude Oil Price Indian Basket (Average Price)
-
7/23/2019 Equity Market Outlook_Oct 2015
10/24
Stability in macro conditions when most global markets w itnessing fragility
Fiscal Deficit as % of GDP Current Account Balance
CPI Inflati on FX reserves, in USD Bn
Page 10
-8.0
-7.0
-6.0
-5.0-4.0
-3.0
-2.0
-1.0
0.0
-35
-30
-25
-20
-15
-10
-5
0
Jun-09
Nov-09
Apr-10
Sep-10
Feb-11
Jul-11
Dec-11
May-12
Oct-12
Mar-13
Aug-13
Jan-14
Jun-14
Nov-14
USD bn Annualized, % of GDP
Source: RBI, CSO, CMIE, SBIMF Research
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
CPI % y-o-y
CPI target range 4% + 2%
6
7
8
9
10
11
12
13
14
260
270
280
290
300
310
320
330
340
350
360
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
FX reserves (USD bn)- LHS Import cover (in months RHS)
-
7/23/2019 Equity Market Outlook_Oct 2015
11/24
Exit of foreign investors was offset by increased domestic investment
Source: NSDL, Antique SBIMF Research
FIIs were sellers of Indian equi ties in SeptemberDomestic MFs, on other hand, have been net buyers fo r 17
months running
Domestic insurance sector also bought into t he equities market
-4.00
-3.00
-2.00
-1.00
0.00
1.002.00
3.00
4.00
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dom MF Net Investments (Trailling 3M in USD Bn)
-10000
-8000
-6000
-4000
-2000
0
2000
4000
6000
8000
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Equity Investment Debt Investment
USD mn
-6
-4
-2
0
2
4
Jan-10
May-10
Oct-10
Feb-11
Jun-11
Oct-11
Feb-12
Jun-12
Oct-12
Feb-13
Jun-13
Oct-13
Feb-14
Jun-14
Oct-14
Feb-15
Jun-15
Insurance (Trailing 3M in USD Bn)
-
7/23/2019 Equity Market Outlook_Oct 2015
12/24
Market outlook
Equity markets witnessed higher volatility in September but Sensex
closed almost unchanged towards the month-end.
Start of the month witnessed jitters of continued global growth
worries ahead of the US Fed policy decision, while the latter halfwas spurred by RBIs surprise rate action.
FIIs continued to be net sellers once again albeit the pace of selling
came off vis--vis that in August.
There exist challenges in terms of getting the economy back on
track. Real estate sector and corporate balance sheets are strained.
Banks balance sheets are stressed with NPAs from previous cycle
excesses and await recapitalisation. The monsoon too has been
below average, staring at a sizeable deficit. This has a
counterbalance from better balance sheets of households, steady
flow of FDI investments and an initial trickle from government
spending. The government needs to push its envelope further in
parliament to get GST reform on-track.
In the short term, markets should remain volatile on the back of local
issues like Bihar elections, monsoon progression, result season
performance; and global developments in US Fed action, China and
resultant fund flows.
This intermittent volatility is an ideal opportunity for a long terminvestor to benefit both for long term capital appreciation in equities
and playing the duration game in the debt markets. We remain well
positioned to offer both the opportunities across our portfolio
strategies.
Market valuations in line with i ts long period average
Source: Bloomberg, SBIMF Research
7
9
11
13
15
17
19
21
23
25
Oct-05
May-06
Dec-06
Jul-07
Feb-08
Sep-08
Apr-09
Nov-09
Jun-10
Jan-11
Aug-11
Mar-12
Oct-12
May-13
Dec-13
Jul-14
Feb-15
Sep-15
Sensex 1Y fwd PE
+1 SD
-1 SD
Mean
-
7/23/2019 Equity Market Outlook_Oct 2015
13/24
Fund Philosophy
-
7/23/2019 Equity Market Outlook_Oct 2015
14/24
SBI Magnum Balanced Fund
Source: SBIMF Research.
Fund Philosophy & Positioning
Invests in a mix of equity & debt securities. Exposure in equity is atleast 50% and exposure in debt & money market securities can be upto
50%. Equity portion is invested in a diversified portfolio of large & mid caps.
Debt portion is invested in investment grade securities with active duration management
Fund Strategy
Growth
Blend
Value
Large
Mid
small
To provide investors long term capital appreciation along with the liquidity of an open-ended scheme by investing in a mix of debt and equity.
The scheme will invest in a diversified portfolio of equities of high growth companies and balance the risk through investing the rest in a
relatively safe portfolio of debt.
Services, 6
Pharma, 3
Metals, 3 Media &
Entertainme
nt, 1
IT, 8
Industrials, 7
Financials,
14
Energy, 5
Consumer
goods, 6
Chemicals, 1
Automobile,
14
-
7/23/2019 Equity Market Outlook_Oct 2015
15/24
SBI Magnum Equity Fund
Source: SBIMF Research.
Fund Philosophy & Positioning
Pure large cap fund, large caps defined as the top 100 companies in terms of market capitalization rank. Relatively low on risk; target the
15th to the 45th percentile of the large cap peer set. Run on active tracking error constraints with emphasis to benchmark coverage.
Medium term (1 year) investment perspective
Fund Strategy
Growth
Blend
Value
Large
Mid
small
Top over-weights are Financials (4.9%) and Industrials (1.7%) and the under-weights, Consumer Staples and Materials. Financials is a pro-
cyclical play while Industrials is an allocation cum bottom-up selection call. The top three positive active positions are SBI, BPCL and Tata
Motors DVR; negative active weights are HDFC and ITC. We are 5% o/w Financials which is distributed equally by u/ws on Cyclicals and
Defensives. Index coverage stands at 57%.
AUTOMOBILE-14
ENERGY-
10
FINANCIAL
SERVICES- 36
IT-
17
PHARMA-
7
Others-
15
-
7/23/2019 Equity Market Outlook_Oct 2015
16/24
SBI Magnum Global Fund
Source: SBIMF Research.
Fund Philosophy & Positioning
Pre-dominantly mid cap. Up to 25% flexibility into large caps for liquidity purposes; these, however, would be largely at the lower
end of the large cap curve. Three pillar investment philosophy Competitive Edge (as defined objectively by market share, gross
margins or brand franchise), Consistent Return on Equity of 20% over time and minimum prospective Growth of 20%; stock selection
within this space driven by valuations and relative risk. Investment perspective long term, 3 years plus
Fund Strategy
The portfolio is fairly diversified across the top holdings as a conscious part of portfolio strategy. The top 5 stocks account for 18% of
the fund.
Growth
Blend
Value
Large
Mid
small
AUTOMOBILE,
13
CONSUMER
GOODS, 20
FINANCIAL
SERVICES, 17
INDUSTRIAL
MANUFACTURI
NG, 17
SERVICES, 8
OTHERS, 26
-
7/23/2019 Equity Market Outlook_Oct 2015
17/24
SBI Magnum Emerging Business Fund
Source: SBIMF Research.
Fund Philosophy & Positioning
High risk, high return philosophy based on concentrated holdings of high conviction ideas. Theoretically, market cap agnostic but
tends to be biased towards small-and-mid caps due to the high return bias. Sector and benchmark agnostic. Investment perspective
long term, 3 years plus
Fund Strategy
The fund runs a concentrated strategy. While technical risk in the portfolio (benchmark risk, market cap risk and sector risk) is and will
remain high, the portfolio, from a business perspective, is largely defensive. The benchmark agnostic nature also makes it inconsistent in
the short term. The top three holdings are P&G Hygiene, HDFC Bank and SCUF.
Growth
Blend
Value
Large
Mid
small
AUTOMOBILE, 8
CONSUMER
GOODS, 19
FINANCIALSERVICES, 17
INDUSTRIAL
MANUFACTURING
, 13
SERVICES, 13
OTHERS, 30
-
7/23/2019 Equity Market Outlook_Oct 2015
18/24
SBI Magnum Taxgain Fund
Source: SBIMF Research.
Fund Philosophy & Positioning
The fund is being managed with a very long term orientation and an objective to generate superior returns through bottom up stock
picking.
Fund Strategy
The fund continues to outperform the benchmark by a good margin. The fund is run with a 75:25 mix between large cap and mid/
small cap stock. In terms of sectors, The fund currently has large overweight on Capital goods and underweight on metals.
Growth
Blend
Value
Large
Mid
small
AUTOMOBILE,
10
ENERGY, 10
FINANCIAL
SERVICES, 26
IT, 14
PHARMA, 8
SERVICES, 8
CONSTRUCTION
, 6
INDUSTRIAL
MANUFACTURING, 4
CEMENT
, 5
OTHERS,
8
-
7/23/2019 Equity Market Outlook_Oct 2015
19/24
SBI Magnum Multicap Fund
Source: SBIMF Research.
Fund Philosophy & Positioning
Diversified Multicap equity fund focused on generating returns through stock selection rather than sector allocation; sector weights
being contained around benchmark levels. Large caps would be limited at a minimum level of 50%
Fund Strategy
The fund runs a near-neutral (+/-2%) strategy on sector allocation and attempts to derive alpha from stock selection based
on recommendations from the analyst team. The fund is presently 62:38 large and mid-and-small-cap. The top active weights are
SBI, Britannia and Tech Mahindra on the large cap side and JK Tyre, DCB and Techno Electric on the mid and small cap side.
Growth
Blend
Value
Large
Mid
small
AUTOMOBILE,
7CONSTRUCTION,
6
CONSUMER
GOODS, 8
ENERGY, 9
FINANCIAL
SERVICES, 26
IT, 12
PHARMA, 8
OTHERS, 23
-
7/23/2019 Equity Market Outlook_Oct 2015
20/24
SBI Magnum Midcap Fund
Source: SBIMF Research.
Fund Philosophy & Positioning
Mid and small cap focused fund invests largely in companies outside of Top 100 companies by Market Cap based on bottom-upinvesting.
Fund Strategy
The fund is overweight on Pharma, Industrials, Materials, Staples and Consumer Discretionary and is underweight on Financials, IT
and Energy.
Growth
Blend
Value
Large
Mid
small
CEMENT
,6CONSUMER
GOODS, 8
FERTILISERS &
PESTICIDES, 9
FINANCIALSERVICES, 19
INDUSTRIAL
MANUFACTURING,
19
PHARMA, 13
TEXTILES, 5
OTHERS, 22
-
7/23/2019 Equity Market Outlook_Oct 2015
21/24
SBI Blue Chip Fund
Source: SBIMF Research.
Fund Philosophy & Positioning
A large cap fund (large caps defined as the top 100 companies in terms of market capitalization rank) with a flexibility to invest up to
20% in midcap stocks. Relatively higher risk than pure large cap; focus to generate alpha by investing in high conviction mid-cap
stocks, when valuation gap between large cap and mid-caps is significant. Medium term (1-2 year) investment perspective for large
cap exposure and 3 years plus perspective for mid-cap exposure.
Fund Strategy
Growth
Blend
Value
Large
Mid
small
Our top over-weight is Consumer Discretionary (6.63%), Industrials (3.36%), Pharma (1.23%) and Telecom (1.2%) and under-weight is
primarily Financials (3.98%), Utilities (3.7%), Energy (3.6%), IT (1.90%), Staples (0.96%) and Materials (0.96%).
AUTOMOBILE,
12
CEMENT
, 5
CONSUMER
GOODS, 10
FINANCIAL
SERVICES, 26INDUSTRIAL
MANUFACTURING,
10
IT, 12
PHARMA, 7
OTHERS, 18
-
7/23/2019 Equity Market Outlook_Oct 2015
22/24
Thank you
-
7/23/2019 Equity Market Outlook_Oct 2015
23/24
Disclaimer
This presentation is for information purposes only and is not an offer to sell or a solicitation to buy anymutual fund units/securities. These views alone are not sufficient and should not be used for thedevelopment or implementation of an investment strategy. It should not be construed as investmentadvice to any party. All opinions and estimates included here constitute our view as of this date and aresubject to change without notice. Neither SBI Funds Management Private Limited, nor any personconnected with it, accepts any liability arising from the use of this information. The recipient of thismaterial should rely on their investigations and take their own professional advice.
Mutual Funds investments are subject to market risks, read all scheme related documentscarefully.
Asset Management Company:SBI Funds Management Private Limited (A joint venture with SBI andAMUNDI). Trustee Company:SBI Mutual Fund Trustee Company Private Limited.
-
7/23/2019 Equity Market Outlook_Oct 2015
24/24
Contact Details
SBI Funds Management Private Limited
(A joint venture between SBI and AMUNDI)
Corporate Office:
9th Floor, Crescenzo,C-38 & 39, G Block,Bandra Kurla Complex,Bandra (East), Mumbai - 400 051Tel: +91 22 6179 3000Fax: +91 22 6742 5687/88/89/90/91
Website: www.sbimf.com
Call: 1800 425 5425
Visit us @ www.youtube.com/user/sbimutualfund
SMS: SBIMF to 56161
Email: [email protected]
Visit us @ www.facebook.com/SBIMF