investment advisory group presentation december 2018 · 6 trump factor and expectation of over...
TRANSCRIPT
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1
Investment Advisory Group
Presentation
December 2018
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Aggressive Moderate Conservative
Direct Equity /Equity Funds 65% 50% 25%
Debt Funds 20% 40% 70%
Alternative Investments 10% 5% -
Gold 5% 5% 5%
Equity Strategy & Recommended Asset Allocation
Sharp correction in Crude Oil, Soothing statement by the US Fed and consequent rally in the INR seems to have lifted
the market sentiments. Strong liquidity infusion by the RBI also seems to have alleviate the concerns related to credit
flow tightening.
In India, focus on infra spending by the government, improved urban consumption, rebounding exports and better
farm income has the potential to shore up the economy in the medium term. However, the Q2FY19 GDP was below
expectation, on the back of lower Agri and Manufacturing performance. Private Consumption saw some tapering of
growth momentum
Strong USD, increasing global interest rates, trade wars and state/general elections could cause volatility in the equity
markets.
On the positive side, the key demand indicators are showing continued traction and there seems to be some pricing
power returning to businesses, as is being witnessed in the strong revenue growth of corporates in Q2FY19 results.
However the earnings performance has been weaker than anticipated.
Post Q2FY19, earnings performance has been mixed with few sectors showing improvement and some showing
weakness. Earnings growth needs to improve for markets to move higher sustainably. From an Equity Mutual Fund
perspective, investors should look at Large cap Funds for fresh investments and SIP into Midcap and Small caps
stocks/funds can begin with the longer horizon.
The Equity investment strategy, continues to remain at 50% Lumpsum and rest 50% staggered over the next 4-5
months.
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Debt Mutual Fund Strategy
Investments into Short Term Funds can be considered with an investment
horizon of 12 months and above.
Investors looking to invest with a horizon of up to 3 months can consider Liquid
Funds, while Arbitrage Funds and Ultra Short Duration Funds can be considered
for a horizon of 3 months and above.
Investors looking to lock in current yields can invest in Fixed Maturity Plan
(FMPs).
Investor who are comfortable with intermittently volatility, can look also at
strategies that focus at the longer end of the yield curve. i.e. High duration
funds.
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Research Presentation – Contents
Outcome of State Assembly elections… likely to be key sentiment driver in near team
Trump factor and expectation of over supply situation results in Brent crude prices falling to near one year low
Divergence seen in developed markets…U.S. economic data continues to remain steady while EU is waning
Trade war taking toll on China‟s GDP growth…may put pressure on its trading partners
Most of the Emerging Market currencies take a breather…see uptick in FPI flows during the month of Nov‟18
Sharp decline in Oil prices and Rupee appreciation led to strong bounce back in Indian indices
Steady IIP and PMI data, high credit growth and strong currency reflect improvement in macro trends
India continued to be fastest growing major economy in the world… as it grew by 7.1% YoY in Q2FY19 though lower than expectations
Early signs of consumption demand weakening, while the larger picture still remains healthy
Capacity utilization improving … Revival of pricing power may push corporates to look for further Capex
Q2FY19 results were mixed… Revenue growth continued to improve while margins got impacted
Upmove in the markets, driven by crude oil, and earnings downgrade led to valuation rising higher again… earnings growth is needed for improvement in valuation
Key concerns to watch out ….
Valuation differential between Large Cap and Midcap Indices remains high…earnings growth remains the key
Nifty 50 rolling returns for last 15 years… S&P BSE Sectoral Indices monthly performance for October 2018
Equity Market Round Up – November 2018
Equity Market – Outlook and Stocks
Fixed Income
G-sec rally continued in November 2018...
Corporate bond yields declined less compared to G-sec yields…tracking caution on credit ratings of companies and tight liquidity conditions
Crude oil prices decline sharply in November 2018…big positive for domestic macros and bond yields
US FOMC gives hints of less aggressive monetary tightening…
CPI inflation for October 2018 declines tracking lower food inflation…
Fiscal deficit for April-Oct 2018 overshoots the budget estimate…
Banking System liquidity tightens further…RBI continues to support liquidity through regular OMO purchases
The G-sec yield curve continues to remain flat…
Key Risks and Variables to watch out for…
Fixed Income Outlook
Equity Mutual Funds
Insurance
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5
Outcome of State Assembly elections…
… likely to be key sentiment driver in near team
State Term Completing on No. of Seats in
Rajya Sabha Time line of Elections No. of Seats in Lok Sabha
Mizoram 15.12.2018 40 Voting Over 1
Rajasthan 20.01.2019 200 7 Dec 2018 25
Chhattisgarh 05.01.2019 90 Voting Over 13
Madhya Pradesh 07.01.2019 230 Voting Over 29
Telangana 119 7 Dec 2018 17
General Elections 03.06.2019 Apr-May 2019 (Expected) 543
Source: Media reports
Three out of Five states have gone through voting round, while two more will go for voting on December 7, 2018.
The outcome of these elections would be released on December 11, 2018.
The outcome of these elections would be key monitorable as markets could interpret results as some kind of trend of
the upcoming general elections (Lok Sabha), which are likely to be held in early part of FY20.
Although, periods of elections have been unpredictable in the past and it is difficult to gauge the exact impact on the
sentiments, clearly this could be a volatile period which may continue to throw good investment opportunities.
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Trump factor and expectation of over supply situation results in Brent
crude prices falling to near one year low
Brent crude prices had risen sharply in the last few month to near its 4 year high of ~USD 85/bbl during the start of October on the back of supply
side concerns, apart from other key reasons like the U.S. sanctions on Iran‟s energy sector, declining Venezuela oil production and Geo political
tensions.
However, in the last two months, Brent crude prices have come off sharply by ~29.5% to its one year low of ~USD 58/bbl on the back of
expectation of higher supply amid concerns of slowing global growth.
U.S. waiver to eight countries including India, China and Japan to continue to buy oil from Iran has also resulted in cooling off some pressure during
the month of Nov‟18.
Moreover, U.S. crude oil production rose by 129,000 bpd in Sept‟18 to a fresh record of 11.475 mn bpd, which also led to downward pressure on
Brent crude prices.
Also, U.S. President‟s Donald Trump‟s tweets criticizing higher crude oil prices and assurance by major oil producers like Saudi Arabia to pump in
more oil in response also resulted in Brent crude oil prices seeing downward movement in the recent past.
Although oil demand has remained soft in the last few months, any expected increase in seasonal demand as winter kicks in, would be key
monitorable for oil price movement in the near term apart from any supply cuts announced in the upcoming OPEC meeting on 6 December 2018.
Going forward, oil supply by OPEC and Non OPEC member nations and political conditions in Middle East on one hand and expectation of global
growth and U.S. shale production on the other hand are likely to direct the crude oil prices in the near to medium term.
55
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-18
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Nov
-18
Nov
-18
USD
/bbl
Brent Crude prices reacting on Trump's tweet in recent past...
Source: Bloomberg, Media Reports
"Looks like OPEC is at it again"
"Hope OPEC will increase production substantially. Need to keep prices
down!"
"Oil prices are too high, OPEC is at it again. Not good!"
"... The OPEC monopoly must get prices down now!"
"So great that oil prices are falling (thank you
President T)..)!!"
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7
U.S. economic data has remained steady over the last many months with trend continuing in the
month of November 2018 as well.
Real Gross Domestic Product increased at an annual rate of 3.5% QoQ in Q3CY18.
The U.S. Manufacturing PMI remained at 55.3 in Nov‟18 vs 55.7 in Oct‟18, while the
unemployment rate stood at 3.7% in Oct 2018, lowest level since 1969.
Moreover, wages climbed sharply in Oct 2018 by the most since the recession ended in 2009,
by 3.1% YoY. This may result in inflation rising in U.S. which is again a positive for the
economy.
US Fed chair statement that interest rates are just below the neutral level, where it would
neither speed up nor slow down economic growth also boosted the global market
sentiments.
On the other hand, European Union (EU) growth has slowed down recently mainly due to
temporary factors like Trade-war, slowdown in global growth, Brexit, Italy slowdown amongst
others.
On the economic data, EU manufacturing PMI signaled the continued growth slowdown with
Nov‟18 reading coming in at 51.8 vs 52.0 in Oct‟18.
Euro area‟s GDP growth slowed down to 0.2% QoQ and 1.7% YoY in Q3CY18 vs 0.4% QoQ
and 2.2% YoY in Q2CY18.
At the same time, recent disagreement between Italian government and European Commission
over the Italy‟s budget proposal has also resulted in some political instability in the region.
Also, Britain has been demanding for softer Brexit deal with EU including a free trade
agreements with U.S. and China, which is also likely to create a overhang on the EU growth as
possibility of a “no deal” situation may affect free movement of goods and services.
Also, expectations of ECB‟s Quantitative Easing (QE) coming to an end from December,
remains a key concern over the growth.
While the U.S. economic data continues to remain steady over the last few quarters, going
ahead, U.S. Fed’s monetary policy stance, liquidity conditions given Fed’s balance sheet
tapering program and U.S. and China trade policies would be key monitorable for the U.S.
economy. While, EU growth has wobbled in the recent past, deals under Brexit and Italy's
revised budget proposal would be key monitorable for European economy.
Divergence seen in developed markets…
…U.S. economic data continues to remain steady while EU is waning
2.7%
2.4%2.2%
1.7%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Q4CY17 Q1CY18 Q2CY18 Q3CY18
Euro area GDP growth showing declining trend (Change YoY%)
Source: Eurostat
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8
Since the beginning of the year, the Trump administration‟s pledge to narrow the U.S. trade deficit with China had resulted in a threat of Trade/tariff
war like situation between U.S. and China, both having the world‟s biggest trading relationship.
The U.S. has imposed tariff on about USD 250 bn worth Chinese goods imported by U.S., thus prompting China to retaliate with charges
on USD 110 bn worth of U.S. products imported by China.
Thus, given such geo-political tensions, International Monetary Fund (IMF) has cut its growth forecast for the first time in more than two years,
blaming escalating trade tensions and stresses in emerging markets. IMF expects global growth at 3.7% YoY for CY18 and CY19 both, which is
0.2% point lower for both years against its forecast in April 2018.
The impact of the ongoing trade war has also resulted in slow down in China‟s Gross domestic product as it grew by 6.5% YoY in Q3CY18
compared to 6.7% YoY seen in Q2CY18, which is also the slowest growth rate since 2009.
Thus, the impact of a trade war between these superpowers may impact the global and other Emerging economies and also the slowdown in
China’s growth is likely to have repercussion on other Emerging economies like South Korea, Taiwan, Thailand, Brazil, Vietnam,
Indonesia amongst others who are trading partners of China.
However, earlier during the month of November, the U.S. president suggested his administration could soon strike a deal with China and as per
media reports, President Trump has agreed that on January 1, 2019, U.S. will leave the tariffs on USD 200 bn worth of product at the 10% and not
raise it to 25%, thus giving a 9- day window for further discussions.
While the deterioration in economic growth data signaled by various agencies may impact the sentiments in near term, announcements
or actions by US President on trade policy and reciprocal announcement by China and other countries would be the key monitorable for
the global growth projections. Also, going ahead, any slow down in Chinese economy is also likely to have repercussion on the China’s
trading partners, especially in Emerging Markets.
Trade war taking toll on China’s GDP growth…
…may put pressure on its trading partners
321 338296
365399
426 440468 483
463506
63 70 70 92 104 111 122 124 116 116 130
0
100
200
300
400
500
600
CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17
US
D B
n
US-China Trade Relations Over the Years
Chinese exports to US US exports to China
Source: US Census Bureau
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Most of the Emerging Market currencies take a breather…
…see uptick in FPI flows during the month of Nov’18
Foreign investors pulled out capital from most of the emerging economies‟ equity markets since the start of the year on the back of trade war like
situation between U.S. and China and firming up of U.S. bond yields on the back of expected higher growth for U.S.
Also the Global liquidity tightening or reduction of major central bank‟s balance sheets have also resulted in the yields going up sharply in the recent
past. This also led to hardening of yields in U.S. and other advanced markets and resultant flight of FPI flows from Emerging Markets (EMs) to dollar
denominated securities in the advanced markets.
However, recently in the month of Nov‟18, most of the EM equity markets saw positive FPI inflows as sentiments improved on the back of sharp
decline in crude oil prices and trade war worries between US and China showing signs of cooling off along with positive statements coming from US
Federal Reserve.
As a result, most of the EM currencies have gained against the US dollar during the month.
Amongst the EMs, Turkish Lira has appreciated by ~6.6% MoM in Nov‟18 and Indian Rupee and Indonesia Rupiah have also appreciated by 5.9%
MoM each while Chinese Yuan appreciated marginally by ~0.2% MoM during the same period.
Going ahead, tightening of liquidity as signaled by major central banks like U.S. Fed and ECB is likely to guide the bond yields up in these
markets and hence may result in money flowing out of EMs to developed markets on the back of risk aversion amongst FPIs. Additionally, any
negative global sentiments due to trade war like situation and its negative impact on exporting EMs may create pressure for EMs equity markets
and currency.
-3.9%
-1.7%
0.1%
0.2%
0.4%
0.8%
1.7%
2.0%
5.9%
5.9%
6.6%
-6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0%
Brazil
Russia
Vietnam
China
Taiwan
Thailand
S Korea
Philippines
India
Indonesia
Turkey
Most of the Emerging Markets currencies have appreciated against USD during Nov 2018
Source: Bloomberg
-378-72
238 248
1,794
3,522
4,440
-1000
0
1000
2000
3000
4000
5000
Vie
tnam
Bra
zil
Ph
ilip
pin
es
Ind
on
esi
a
Th
aila
nd
S K
ore
a
Ta
iwa
n
in U
SD M
nPositive FPI inflows seeing in most of the Emerging
Markets during November 2018(in USD mn)
Source: Bloomberg, *Data for Nov 2018
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10
Sharp decline in Oil prices and Rupee appreciation led to strong bounce back in
Indian indices
Nifty 50 registered 4.7% gain in the month of November 2018
owing to
sharp decline of ~22% MoM in Brent Crude Oil prices
appreciation of Rupee by ~6% MoM
revival in buying from FPI to the tune of ~Rs. 60 bn
and steady flow from DIIs to the tune of ~Rs. 36 bn
rising expectation of lower Current Account Deficit
However, further upmove in the markets would depend
on consistently oil prices remaining at lower levels and
benefits of lower oil prices and currency appreciation
flowing into the corporate earnings.
63
65
67
69
71
73
75
De
c-1
7
Jan
-18
Mar
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-1
8
Sep
-18
Oct
-18
No
v-1
8
Movement in Indian Rupee (INR per unit of USD)
Source: Bloomberg
9900
10100
10300
10500
10700
10900
11100
11300
11500
11700
11900D
ec-
17
Jan
-18
Mar
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-1
8
Sep
-18
Oct
-18
No
v-1
8
Nifty 50
Source: Bloomberg
-400
-300
-200
-100
0
100
200
300
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18
Trend in FPI and DII (Rs in Bn)
FPI - Equity DIIs
Source: NSDL, SEBI Data as on 29 Nov 2018
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11
Steady IIP and PMI data, high credit growth and strong currency reflect
improvement in macro trends
While certain Economic data like rising Fiscal deficit, Current Account Deficit and rising trade deficits in recent months are yet to reverse
0.1%
0.6%
1.4%
0.6%
2.5%
1.1%
2.1%1.9%
2.4%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19
Current Account Deficit rising sharply in last few quarters (as % of GDP)
Source: RBI
Certain macro data showing improvement – steady PMI and IIP data, improving credit growth data and lower CPI .
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
Jul-
17
Au
g-1
7
Se
p-1
7
Oct-
17
No
v-1
7
De
c-1
7
Jan
-18
Fe
b-1
8
Ma
r-1
8
Ap
r-1
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Ma
y-1
8
Jun
-18
Jul-
18
Au
g-1
8
Se
p-1
8
Oct-
18
in %
CPI based inflation coming down in last few months
CPI (%)Source: Bloomberg, MoSPI, Min of Commerce
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
Au
g-1
6
Se
p-1
6
Oct-
16
No
v-1
6
De
c-1
6
Jan
-17
Fe
b-1
7
Ma
r-1
7
Ap
r-1
7
Ma
y-1
7
Jun
-17
Jul-
17
Au
g-1
7
Se
p-1
7
Oct-
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No
v-1
7
De
c-1
7
Jan
-18
Fe
b-1
8
Ma
r-1
8
Ap
r-1
8
Ma
y-1
8
Jun
-18
Jul-
18
Au
g-1
8
Se
p-1
8
IIP and core sector growth data stabilizing in last few months (YoY %)
Source: MoSPI, Min of Commerce
0
2
4
6
8
10
12
14
16
2/1
7/2
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7
3/1
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/1
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/1
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/1
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/1
7/2
01
8
Ch
an
ge
Yo
Y %
Credit Growth continues to show improvement in last few months (YoY %)
Source: RBI
96.1%
103.9%
90%
92%
94%
96%
98%
100%
102%
104%
April-October FY18 April-October FY19
Fiscal Deficit as a percentage of full year target rises sharply in YTD FY19 upto October (in %)
Source: CGA
52.6
54.7
52.452.1
51.051.6
51.2
53.1
52.351.7
52.2
53.1
54
48
49
50
51
52
53
54
55
56
No
v-1
7
De
c-1
7
Jan
-18
Fe
b-1
8
Ma
r-1
8
Ap
r-1
8
Ma
y-1
8
Jun
-18
Jul-
18
Au
g-1
8
Se
p-1
8
Oct-
18
No
v-1
8
Manufacturing PMI rises to 11 month high in Nov'18
Source: Bloomberg
11.4 11.6
9.0
14.0 13.8
14.9
16.3
12.0
13.7 13.714.6
16.6
18.0
17.414.0
17.1
7.0
9.5
12.0
14.5
17.0
Jul-1
7
Aug-1
7
Sep-1
7
Oct-
17
No
v-1
7
De
c-1
7
Jan-1
8
Feb
-18
Ma
r-1
8
Apr-
18
Ma
y-1
8
Jun-1
8
Jul-1
8
Aug-1
8
Sep-1
8
Oct-
18
Trade Deficit seen rising in the last few month ($ Bn)
Source: Ministry of Commerce and Industry
Certain macro data like steady PMI and IIP data along with improving non-food credit growth to ~15% YoY in the first week Nov‟18 and
cooling off of CPI based inflation in the recent months are signalling improving macro scenario. While, certain economic data like higher fiscal
deficit of ~103.9% for April-October of FY19, rising Current Account deficit and Trade Deficit are indicating weakness in the certain macro
picture.
Going ahead, the recent decline in the oil prices and appreciation of Indian rupee may result in lowering of CAD and Trade Deficit
and also it is likely to be lower than earlier estimate given the sharp fall in crude prices seen in the recent months.
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12
India continued to be fastest growing major economy in the world… as it
grew by 7.1% YoY in Q2FY19 though lower than expectations
India’s GDP grew at 7.1% YoY in Q2FY19 and Gross Value Added (GVA) at 6.9% YoY at a
slower pace than Q1FY19.
H1FY19 GDP growth stood at 7.6% YoY compared with 6.0% YoY in H1FY18 and GVA
growth stood at 7.4% YoY compared with 5.8% YoY in H1FY18.
Q2FY19 GVA growth was driven by growth in services sectors especially in following sectors;
Electricity, Gas, Water supply & other Utility Services – up by 9.2% YoY vs 7.3% YoY in
Q1FY19
Trade, Hotel, Transport, Communication & Services Related To Broadcasting – up by
6.8% YoY vs 6.7% YoY in Q1FY19
Public Admin, Defence & other services – up by 10.9% YoY vs 9.9% YoY in Q1FY19
However, some of the sectors grew at lower rate as compare to Q1FY19;
Agriculture, Forestry & Fishing – up by 3.8% YoY vs 5.3% YoY in Q1FY19
Mining & quarrying – fell by 2.4% YoY vs growth of 0.1% YoY in Q1FY19
Manufacturing – up by 7.4% YoY vs 13.5% YoY in Q1FY19
Construction – up by 7.8% YoY vs 8.7% YoY in Q1FY19
On the expenditure side, Gross Fixed Capital Formation (GFCF) growth, a proxy to investment
demand, continued to improve on YoY basis. However, private consumption on the one hand
slowed down a bit, government consumption growth on other hand saw improvement.
The improvement in GFCF, a proxy for private capex, is hinting towards improvement in
private capex that may lead to further improvement in GDP growth rate going ahead.
While the multilateral agencies continue to keep faith reposed in India’s sustained growth
momentum driven by strong consumption and investment growth in the economy, they
marginally trimmed their growth forecast for FY19 and FY20 owing to liquidity constraint
at NBFCs and rising interest rates.
7.6
6.8
6.15.6
6.3
7.0
7.78.2
7.1
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19
Trend in GDP growth (% YoY)
Source: Ministry of Statistics and Programme Implementation
Expenditures of GDP (% YoY) Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19
Private Final Consumption Expenditure 6.8 5.9 6.7 8.6 7.0
Government Final Consumption Expenditure 3.8 6.8 16.8 7.6 12.7
Gross Fixed Capital Formation 6.1 9.1 14.4 10.0 12.5
Change in Stocks 5.8 7.2 7.8 8.6 3.8
Valuables 54.2 37.2 29.1 (8.0) 23.3
Exports 6.8 6.2 3.6 12.7 13.4
Less Imports 10.0 10.5 10.9 12.5 25.6
Discrepancies 15.4 (55.0) (21.8) 0.4 22.7
GDP at market prices 6.3 7.0 7.7 8.2 7.1
Source: Mospi
Industry Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19
Agriculture, Forestry & Fishing 2.6 3.1 4.5 5.3 3.8
Mining & quarrying 6.9 1.4 2.7 0.1 (2.4)
Manufacturing 7.1 8.5 9.1 13.5 7.4
Electricity, Gas, Water supply & other Utility Services7.7 6.1 7.7 7.3 9.2
Construction 3.1 6.6 11.5 8.7 7.8
Trade, Hotel, Transport, Communication &
Services Related To Broadcasting8.5 8.5 6.8 6.7 6.8
Financial, Insurance, Real Estate &
Professional services6.1 6.9 5.0 6.5 6.3
Public administration, defence & other services6.1 7.7 13.3 9.9 10.9
GVA at Basic Price 6.1 6.6 7.6 8.0 6.9
Source: Mospi
Growth (% YoY) in Sectoral GVA at basic prices
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13
Early signs of consumption demand weakening, while the larger picture still
remains healthy.
Domestic airline passenger traffic continued to see
double digit growth for 50 straight months
Strong same store growth in QSR* companies
depicts urban demand remain steady Volume growth for FMCG companies remained steady
during Q2FY19 though moderated a bit
Weakness witnessed in Passenger vehicle growth Personal loan growth also witnessing moderation However, hike in MSP for Rabi crops may support the rural
demand growth momentum
Overall consumption demand remains steady key indicators continue to report steady growth…
However, initial signs of weakness are emerging in terms of moderation in auto sales numbers especially in PV and moderation in personal loan growth
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19
Same store growth in QSR* companies
Jubilant FoodWorks Westlife DevelopmentSource: Company Data, Note: *Quick service restaurants
Volume growth YoY % Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19
HUL consumer business 4 11 11 12 10
Marico Group 8 9 1 12 6
Marico (Parachute) 12 15 (5) 9 8
Marico (saffola) 3 0 (1) 10 5
Marico (hair oil) 12 8 11 15 5
Jyothy Lab 4 12 11 19 4
Emami 10 6 9 16 (4)
Dabur 7 13 8 21 8
Colgate (1) 12 4 4 7
Source: Company data
Trend in Volume growth for FMCG Companies
MSP
(Rs/quintal)
FY18
MSP
(Rs/quintal)
FY19
Cost of
production
(Rs/quintal) FY19
Increase
in MSP (%)
Return over
cost* (%)
Wheat 1735 1840 866 6.1 112.5
Barley 1410 1440 860 2.1 67.4
Gram 4400 4620 2637 5.0 75.2
Masur (Lentil) 4250 4475 2532 5.3 76.7
Rapeseed & Mustard 4000 4200 2212 5.0 89.9
Safflower 4100 4945 3294 20.6 50.1
Source: http://pib.nic.in
Hike in MSP for Rabi Crops
While overall consumption demand condition remained steady, some early signs are coming to forefront which indicates weakness is creeping in the consumption
demand. Moderation in personal loan growth and tightness in lending and lending rate may create further pressure going ahead. Similarly, a deficiency in monsoon (~9%
from LPA) and lower Rabi sowing may lead to slowdown in rural demand but hike in Rabi MSPs, higher Kharif crop production output (first est. 141 mn tonnes) and
reservoir levels (~100% of last year‟s storage) may provide some cushion.
However, increased focus of the government towards doubling the rural income, hike in Kharif and Rabi crop MSPs, higher allocation to schemes related to
Urban India and higher per capita income is likely to keep consumption demand buoyant in the long term.
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Oct-
15
No
v-1
5D
ec-1
5Jan-1
6F
eb
-16
Ma
r-1
6A
pr-
16
Ma
y-1
6Jun-1
6Jul-1
6A
ug-1
6S
ep-1
6O
ct-
16
No
v-1
6D
ec-1
6Jan-1
7F
eb
-17
Ma
r-1
7A
pr-
17
Ma
y-1
7Jun-1
7Jul-1
7A
ug-1
7S
ep-1
7O
ct-
17
No
v-1
7D
ec-1
7Jan-1
8F
eb
-18
Ma
r-1
8A
pr-
18
Ma
y-1
8Jun-1
8Jul-1
8A
ug-1
8S
ep-1
8O
ct-
18
YoY
%
Sustained double digit domestic airline passenger growth for last 50 months
Source: DGCA
10
0.8 0.5
-0.7 -1.0
-16-18-20
-15
-10
-5
0
5
10
15
HondaCars
M&M MarutiSuzuki
HyundaiMotor
TataMotors
Toyota Ford India
(Yo
Y gr
ow
th in
%)
PV sales in November 2018
Source: Media Reports
11.00
12.00
13.00
14.00
15.00
16.00
17.00
18.00
19.00
20.00
21.00
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Jul-
15
Oct
-15
Jan
-16
Ap
r-1
6
Jul-
16
Oct
-16
Jan
-17
Ap
r-1
7
Jul-
17
Oct
-17
Jan
-18
Ap
r-1
8
Jul-
18
Oct
-18
% Growth in Personal loan (YoY)
Source: RBI
______________________________________________________________________
14
Capacity utilization improving …
…. Revival of pricing power may push corporates to look for further Capex
Central government continued its efforts to push capex cycle by raising allocation for Capital expenditure
– CAGR 11.1% YoY over FY15 to FY19E
Govt. spending rose by ~10% YoY in Apr-Oct’18
India‟s fiscal deficit touched 103.9% of the budgeted target during the Apr-Oct period
The aggregate capital expenditure by 20 major states in April-Sept of FY19 was Rs 1.31
trillion, 16% higher than in the year-ago period, Uttar Pradesh (151%), Rajasthan (62%) and
Gujarat (29%) reported the sharpest acceleration in capex in H1FY19
Govt is keen to set up 5000 compressed bio-gas plant in next 5 years by investing Rs.1.75 trillion
Indicators of Investment demand also looking up
Growth in Gross Fixed Capital Formation, a proxy to investment activity in India, is witnessing
a sharp improvement from 0.8% YoY growth in Q1FY18 to 12.5% YoY growth in Q2FY19.
Cement production is up by 18.4% YoY in Oct‟18
Import of “Machinery, electrical & non-electrical” and “Electronic goods” rose by 12.5% YoY and
31.9% YoY in Oct‟18
As per the RBI‟s annual report, household financial savings, which has improved from 9.1% in FY17
to 11.1% in FY18, are the most important source of funds for investment in the economy.
FDI in India, which grew by 23% YoY to USD 12.75 bn during Q1FY19, also bodes well for
investment activity going ahead.
Steady government efforts to push capex cycle and steady in demand condition led to sharp
improvement in Capacity Utilization which stood at 75% in Q1FY19.
PSU, Private and foreign companies have started participating in the capex cycle,
Swedish company IKEA plans to open over 40 stores across different formats as against 25 stores
(Rs.105 bn capex) planned earlier.
Vodafone Idea is planning for Rs.270 bn Capex for 4G coverage by FY20
JSW Steel to invest over Rs.50 bn on strengthening downstream manufacturing capacity
Capital spending by some of India Inc’s larger firms rose to a staggering ~Rs.4.63 trillion at
the end of FY18, up from ~Rs.3.47 trillion in FY17.
A lot of corporates have stayed back in recent past when it comes to capex announcement due to slack period seen in their profitability in last 3-4 years.
However, some of the companies have started taking initiative for new capex announcement as they see improvement in their capacity utilization. We
believe that as the aggregate demand scenario is expected to remain steady going ahead owing to steady growth in automobile sales, cement production,
improvement in order book for capital goods companies and rising GFCF, there is likely to be revival in pricing power of the corporate for their goods and
services, which may push corporates to initiate fresh capex announcement.
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
Q3F
Y16
Q4F
Y16
Q1F
Y17
Q2F
Y17
Q3F
Y17
Q4F
Y17
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
(in Y
oY %
)
Trend in GFCF growth
Source: MOSPI
-3.1%
0.3%
0.7% 1.2%
-1.3%
16.9%17.7%
19.6%
23.1%
13.5%
16.5%
13.0% 13.2%
10.8%14.3%11.8%
18.4%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Jun
-17
Jul-
17
Au
g-1
7
Sep
-17
Oct
-17
No
v-1
7
De
c-1
7
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-1
8
Sep
-18
Oct
-18
Healthy growth in cement production over the last one year (YoY %)
Source: MoSPI
______________________________________________________________________
15
Q2FY19 results were mixed…
… Revenue growth continued to improve while margins got impacted
The corporate results announced far in Q2FY19 were as per the market expectation where top line continued to improve but margins got impacted.
The net sales of 196 companies in CNX 200 index grew by 21.2% YoY. However, rising commodity prices and delay in pricing action affected the EBITDA, which
grew at a slower pace of 9.5% YoY. However, Reported PAT fell by 4.7% YoY during the quarter. Excluding banking, financial and insurance (BFSI) companies‟
data, net sales would have grown by 23.1% YoY and EBITDA by 11.1% YoY, while Reported PAT fell by 2.3% YoY.
The demand momentum continued to remain healthy for FMCG companies as seen in volume growth especially in rural India. Capital Goods companies also saw
improvement in revenue growth owing to healthy order book and infrastructure push by the government. Automobile sector saw muted topline growth due to delayed
festive season and on the cost side due to commodity price rise. Management of these companies have highlighted that the price hike has been taken and this is
likely to be reflected in the next quarter. In the banking space, Corporate banks witnessed reduction in fresh NPA recognition. IT companies witnessed improvement
in demand and a tailwind from currency depreciation.
We believe the demand improvement seen in recent earnings announcement is likely to continue going ahead on the back of improvement in global
growth and in domestic micro level fundamentals like improving rural demand, steady growth in urban demand and gradual acceleration in capex
activity especially in private sector. We think that the trend of organized sector gaining share from the unorganized sector would continue to gain
traction in the new GST regime as the number of people under the tax net increases, which is likely to help improve corporate earnings further in the
medium term.
Q2FY19 Q1FY19 Q2FY18 Q2FY19 Q1FY19 Q2FY18 Q2FY19 Q1FY19 Q2FY18
Air Transport Service 16.9 13.2 27.0 (236.1) (101.0) 277.3 (218.2) (96.6) 294.4
Auto & Auto Anc 7.0 18.2 14.6 (12.1) 17.8 22.8 (26.9) (28.3) 17.1
BFSI 9.8 11.0 7.2 10.2 0.1 1.7 (39.2) (36.6) 13.3
Capita l Goods 35.0 29.3 9.7 123.0 164.6 47.8 81.7 156.9 (38.9)
Cement & Products 15.0 15.4 15.7 (5.9) (4.5) 7.9 (6.3) (16.8) (6.2)
Chem & Fert 17.2 12.5 1.1 0.4 6.0 24.9 0.5 0.9 36.1
FMCG & Retai l 7.1 0.1 (6.0) 10.8 19.0 13.9 15.4 20.7 13.3
Healthcare 9.5 15.9 3.7 (6.2) 38.7 (7.1) (10.1) 67.4 (19.7)
Hotels & Restaurants 13.3 7.5 (4.0) (1.1) 18.6 (14.7) (90.7) (132.0) 143.7
Infrastructure 18.6 11.6 6.4 8.3 5.5 25.2 13.2 16.1 50.7
IT 16.3 13.0 4.6 17.5 15.3 3.1 12.8 12.7 4.8
Logis tics 26.1 6.9 6.2 62.0 15.6 36.9 46.8 2.4 45.0
Media & Ent 70.6 71.6 (3.2) 56.2 75.8 6.1 (11.3) 59.8 56.0
Metal & Min 20.9 27.2 25.5 50.6 52.5 33.8 75.2 82.7 49.4
Miscel laneous 35.7 12.4 (21.1) 232.7 (159.0) (72.0) 372.5 (89.9) (83.2)
Oi l & Gas 48.1 34.0 13.7 20.4 63.9 34.8 11.3 37.4 22.9
Power 12.7 2.0 (0.4) (14.7) (0.9) 3.4 5.7 15.6 3.5
Realty 19.6 10.8 (0.0) 2.4 (11.4) 4.3 109.0 87.5 (3.8)
Telecomm (3.6) (12.8) (12.8) (33.5) (24.9) (22.0) (3,598.6) 194.4 (95.2)
Texti les 25.8 64.9 56.1 (58.9) 72.5 54.6 (227.4) 13.4 (25.6)
Grand Total 21.2 18.7 9.0 9.5 15.7 9.6 (4.7) 11.8 9.7
ex BFSI 23.1 18.7 8.3 11.1 15.6 8.7 (2.3) 15.6 8.9
Source: Capitaline
YoY Change in %Net Sales EBITDA Reported PAT
______________________________________________________________________
16
Indian markets ended on a positive note during the month of November 2018 as S&P BSE Sensex
and Nifty 50 ended with the gain of 5.1% MoM and 4.7% MoM, respectively. The upmove was
mainly due to ~22% MoM fall in crude oil prices and ~6% MoM appreciation in Indian Rupee.
Corporate results in Q2FY19 witnessed strong revenue growth, however, they have also witnessed
compression in margins due to higher raw material cost, which led to downgrade in FY19E EPS.
Currently, the S&P BSE Sensex is trading at 20.8x FY19E consensus EPS of Rs.1740 and
17.2x FY20E consensus EPS of Rs.2100. (S&P BSE Sensex price as on 30.11.2018).
However, we expect the GDP growth momentum to pickup going ahead given the steady
growth seen in IIP, Core sector and other lead indicators, which may lead to increase in the
corporate earnings and thus improve the market valuations.
In long term India is likely to see a steady growth on the back of improvement in Rural
economy, rising government expenditure and higher disposable income in the hands of
consumers. With strong demographic dividend that India is seeing, we expect the economic
growth and demand conditions in the country to remain strong for a long period. This is
likely to augur well for investment in equities.
Hence, investors should use any major volatility in the equity markets as an opportunity to
adding into their exposure in line with their risk profile with a 2-3 years investment horizon.
Upmove in the markets, driven by crude oil, and earnings downgrade led to valuation
rising higher again… earnings growth is needed for improvement in valuation
0
5
10
15
20
25
30
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
No
v-0
7
Ma
y-0
8
Oct-
08
Ma
r-0
9
Aug-0
9
Feb
-10
Jul-
10
De
c-1
0
Ma
y-1
1
No
v-1
1
Apr-
12
Sep-1
2
Ma
r-1
3
Aug-1
3
Jan-1
4
Jun-1
4
De
c-1
4
Ma
y-1
5
Oct-
15
Ma
r-1
6
Sep-1
6
Feb
-17
Jul-
17
De
c-1
7
Jun-1
8
No
v-1
8
S&P BSE Sensex & Trailing P/E
S&P BSE Sensex (LHS) P/E (RHS)Source: Capitaline
1385 13601540
1740
2100
0
500
1000
1500
2000
2500
FY16 FY17 FY18 FY19E FY20E
S&P BSE Sensex Consensus EPS (Rs.)
Source: Bloomberg
14
6.5
52
.06
95
.3
95
.3
54
.5
68
.6
60
.8
83
.6
74
.2
74
.1
11
4.2
76
.5
0
20
40
60
80
100
120
140
160
De
c-0
7
De
c-0
8
De
c-0
9
De
c-1
0
De
c-1
1
De
c-1
2
De
c-1
3
De
c-1
4
De
c-1
5
De
c-1
6
De
c-1
7
No
v-1
8
Mkt Cap to India GDP (curr prices)
Source: Bloomberg
Bubble Territory -Previous peak with Sensex at ~21000
Mkt cap to GDP highest in last
seven year
______________________________________________________________________
17
Key concerns to watch out ….
Domestic factors ….elections, currency movement, liquidity situation and demand momentum
Outcome of five state election would be one of the key determinants of investor sentiment before the General
Elections.
If Rupee depreciates (~8.9% CYTD November 2018), then it may impact the country‟s twin deficit.
Accentuation of contagious effect of an NBFC default to other companies/sectors
Tightening of corporate credit cycle may lead to delay in capex cycle due to funding requirement
Weakening of discretionary consumption demand
Global factors ….hike in interest rate, rollback of QE and trade war
Quantitative tapering by the US and Europe leading to tightening of global liquidity, impacting global currencies
while strengthening USD.
Faster interest rate hike by the US Fed leading to rise in bond yield thereby resulting in shift of capital from
Emerging markets to Developed markets.
Rising trend of protectionism across economies leading to trade war situation could pose a risk to overall
global growth.
Slowdown in growth in key developed (Europe) and developing (China) economies
Worsening in geo-political situations (Brexit, trade wars, etc) across globe.
Rise in volatility in commodity prices could put pressure on the global financial markets.
______________________________________________________________________
18
Valuation differential between Large Cap and Midcap Indices remains
high…earnings growth remains the key
0.0
10.0
20.0
30.0
40.0
50.0N
ov-
07
Mar
-08
Jul-
08
No
v-0
8
Mar
-09
Jul-
09
No
v-0
9
Mar
-10
Jul-
10
No
v-1
0
Mar
-11
Jul-
11
No
v-1
1
Mar
-12
Jul-
12
No
v-1
2
Mar
-13
Jul-
13
No
v-1
3
Mar
-14
Jul-
14
No
v-1
4
Mar
-15
Jul-
15
No
v-1
5
Mar
-16
Jul-
16
No
v-1
6
Mar
-17
Jul-
17
No
v-1
7
Mar
-18
Jul-
18
No
v-1
8
Valuation differential between Large Cap and Midcap Indices corrected but still remains high
Trailing P/E S&P BSE Midcap Trailing P/E S&P BSE Sensex
Source: Capitaline
1.0
0.70.7 0.8 0.8
1.0
0.9
1.3 1.3
1.4
1.9
1.4
0.0
0.5
1.0
1.5
2.0
No
v-0
7
Mar
-08
Jul-
08
No
v-0
8
Mar
-09
Jul-
09
No
v-0
9
Mar
-10
Jul-
10
No
v-1
0
Mar
-11
Jul-
11
No
v-1
1
Mar
-12
Jul-
12
No
v-1
2
Mar
-13
Jul-
13
No
v-1
3
Mar
-14
Jul-
14
No
v-1
4
Mar
-15
Jul-
15
No
v-1
5
Mar
-16
Jul-
16
No
v-1
6
Mar
-17
Jul-
17
No
v-1
7
Mar
-18
Jul-
18
No
v-1
8
Valuation Premium of Midcap over Sensex
Source: Capitaline
______________________________________________________________________
19
Nifty 50 rolling returns for last 15 years
Source for entire data stated above is ICRA Online Ltd. (For Disclaimer of ICRA Online Ltd, refer http://www.icraonline.com/legal/standard-disclaimer.html)
-80
-60
-40
-20
0
20
40
60
80
100
120
No
v-0
4
No
v-0
5
No
v-0
6
No
v-0
7
No
v-0
8
No
v-0
9
No
v-1
0
No
v-1
1
No
v-1
2
No
v-1
3
No
v-1
4
No
v-1
5
No
v-1
6
No
v-1
7
No
v-1
8
Nifty 50: 1-year rolling return for last 15 years
1 Year avgSource: ICRA Online
-10
0
10
20
30
40
50
60
70
No
v-0
4
No
v-0
5
No
v-0
6
No
v-0
7
No
v-0
8
No
v-0
9
No
v-1
0
No
v-1
1
No
v-1
2
No
v-1
3
No
v-1
4
No
v-1
5
No
v-1
6
No
v-1
7
No
v-1
8
Nifty 50: 3-year rolling return for last 15 years
3 Years avgSource: ICRA Online
-10
0
10
20
30
40
50
No
v-0
4
No
v-0
5
No
v-0
6
No
v-0
7
No
v-0
8
No
v-0
9
No
v-1
0
No
v-1
1
No
v-1
2
No
v-1
3
No
v-1
4
No
v-1
5
No
v-1
6
No
v-1
7
No
v-1
8
Nifty 50: 5-year rolling return for last 15 years
5 Years avgSource: ICRA Online
______________________________________________________________________
20
S&P BSE Sectoral Indices monthly performance for November 2018
7.2%6.7% 6.6%
5.6%5.1%
4.7%
0.0%
0.0%
-1.6%-2.4% -2.7%
-5.5%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
ConsDurable
Realty Cap Goods Bankex Auto FMCGSector
Infra. Oil&Gas IT Power Healthcare Metal
(Month on Month change in %)
S&P BSE Sectoral Indices monthly performance
Source: BloombergSource: BloombergSource: Bloomberg
______________________________________________________________________
21
Equity Market Round Up – November 2018
Indices 30 Nov 2018 31 Oct 2018 Chg %
S&P BSE Sensex 36,194 34,442 5.1
S&P BSE Mid Cap 15,039 14,613 2.9
S&P BSE Small Cap 14,427 14,201 1.6
S&P BSE 100 11,119 10,662 4.3
S&P BSE 500 14,429 13,882 3.9
Net Flow (Rs. Bn) FPI DII
CY18* (361) 1088
CY17 513 1187
CY16 151 475
CY15 131 710
Source: BSE, NSDL (*CY18 FPI data and DII data as on 29 Oct 2018)
Indian markets ended on a positive note during the month of
November 2018 as S&P BSE Sensex and Nifty 50 ended with the
gain of 5.1% MoM and 4.7% MoM, respectively.
The S&P BSE Midcap index and the S&P BSE Smallcap index
also ended on a positive note with the gain of 2.9% MoM and 1.6%
MoM, respectively.
On the sectoral indices front, the S&P BSE Cons. Durable index
and S&P BSE Realty index were the top two outperformers, as
they rose by 7.2% MoM and 6.7% MoM, respectively. The S&P
BSE Metal index and S&P BSE Healthcare index were top two
underperformers as they fell by 5.5% MoM and 2.7% MoM,
respectively.
During the month of November‟18, FPIs were net buyers to the
tune of ~Rs.60 bn while DIIs were net buyers to the tune of
~Rs.36 bn (as of 29 November 2018).
Source: Bloomberg
20000
23000
26000
29000
32000
35000
38000
41000
Dec
-14
May
-15
Oct
-15
Feb-
16
Jul-1
6
Dec
-16
Apr-1
7
Sep-
17
Feb-
18
Jun-
18
Nov
-18
S&P
BSE
Sens
ex L
evel
s
BSE Sensex Price Earning (PE) 1 year forward
17x
19x
15x
21x
______________________________________________________________________
22
Equity Market Outlook Indian markets would be closely tracking the outcome of state assembly elections as it would be the key sentiment driver in near term.
In commodities markets, the Trump (US President) factor and expectation of oversupply situation resulted in sharp decline in Brent crude oil prices, which are currently hovering
around near one-year low. Going ahead, any increase in seasonal demand for oil and outcome of upcoming OPEC meeting on 6 December 2018 would be key monitorable for
oil price movement in the near term.
In global markets, a divergence was seen in growth momentum in developed markets with the US continued to see steady growth, while EU growth momentum started waning.
Similarly, China is also witnessing slowdown in GDP growth mainly due to ongoing trade issues with the US. This may also put pressure on China‟s trading partners.
However, majority of the emerging markets witnessed uptick in FPI flows during the month as a result currencies of these market also appreciated in the range of 2-6% MoM.
Sharp decline in Brent crude oil and rupee appreciation led to strong bounce back in Indian indices. However, further upmove in the markets would depend on consistently oil
prices remaining at lower levels and benefits of lower oil prices and currency appreciation flowing into the corporate earnings.
Steady IIP and PMI data, high credit growth and strong currency during the month continue to reflect improvement in macro trends. The GDP growth in Q2FY19 came in at 7.1%
YoY, which was lower than expectations, however, India continued to be fastest growing major economy in the world.
On the demand scenario, the consumption demand is showing some early signs of weakening in terms of moderation in automobiles sales numbers especially in Passenger
Vehicle and moderation in personal loan growth. However, the larger picture still remains healthy as some key indicators like domestic air passenger data, SSG growth in QSR
and volume growth of FMCG companies continued to report steady growth.
While consumption demand looks weakening, indicators of Investment demand is looking up with capacity utilization levels started to improve. However, a majority of corporate is
likely to follow once they see revival in pricing power for their goods and services.
The corporate results announced far in Q2FY19 were as per the market expectation where top line continued to improve but margins got impacted. The net sales of 196
companies in CNX 200 index grew by 21.2% YoY. However, rising commodity prices and delay in pricing action affected the EBITDA, which grew at a slower pace of 9.5% YoY.
However, Reported PAT fell by 4.7% YoY during the quarter
Indian markets ended on a positive note during the month of November 2018 as S&P BSE Sensex and Nifty 50 ended with the gain of 5.1% MoM and 4.7% MoM, respectively.
The upmove was mainly due to ~22% MoM fall in crude oil prices and ~6% MoM appreciation in Indian Rupee. Corporate results in Q2FY19 witnessed strong revenue growth,
however, they have also witnessed compression in margins due to higher raw material cost, which led to downgrade in FY19E EPS.
Currently, the S&P BSE Sensex is trading at 20.8x FY19E consensus EPS of Rs.1740 and 17.2x FY20E consensus EPS of Rs.2100. (S&P BSE Sensex price as on 30.11.2018).
However, we expect the GDP growth momentum to pickup going ahead given the steady growth seen in IIP, Core sector and other lead indicators, which may lead to increase in
the corporate earnings and thus improve the market valuations.
In long term India is likely to see a steady growth on the back of improvement in Rural economy, rising government expenditure and higher disposable income in the hands of
consumers. With strong demographic dividend that India is seeing, we expect the economic growth and demand conditions in the country to remain strong for a long period. This
is likely to augur well for investment in equities.
However, in the near to medium term, some of the key concern on the domestic side like elections, currency movement, tightening in corporate credit cycle, weakening of
discretionary consumption demand and earnings momentum would be key monitorable. Similarly, global factors like rising interest rate, rollback of quantitative easing impacting
global currencies, slowdown in growth and trade wars are also likely to bring volatility in the market which in turn may provide opportunity to invest for long term.
We continue to recommend that the investment strategy should be 50% lumpsum and rest 50% staggered over the next 4-5 months. From investment perspective, focus should
be on Large cap stocks or Midcaps where the valuations are reasonable considering their long term averages and growth outlook. Investment into BEL, Voltas, KEC
International, SBI, ITC, Godrej Agrovet, Birla Corp, Thyrocare, Phoenix Mills, M&M, Exide, PLNG and Reliance could be looked upon from a 2-3 year perspective in line with the
individual risk profile.
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23
Recommended Stocks (*CMP as on December 3, 2018)
Bharat Electronics (CMP: Rs.85): BEL is a niche public sector play on defence sector with strong and readily available manufacturing base in the defense space compared to various other
players which are at planning stage of setting up the capacity. During the quarter BEL saw sharp improvement in its operational performance both on the revenue growth as well as improvement
in operating margin. In the near term, we believe execution of low margin orders for Electronic Voting Machine (EVM) and VVPAT are likely to drag the gross margins for the company. While
over the long term, BEL is likely to benefit significantly from the Government‟s key orders in the defence segment and thereby improve margin for the company. Additionally, current order book
to bill ratio continues to remain robust at ~4.7x on FY18 revenue and expected order inflow for Akash Missile System in H2FY19 is further likely to drive the order inflow in the coming quarters
and improves the revenue visibility for the company. However, the recent announcement of revision of PBT margins from 12.5% to 7.5% on prospective nomination based defence orders would
be structural negative news for Defence sector PSUs as it would remain a cause of concerns on the future margins. However, policy being applicable only on the prospective nomination based
orders; current orders would be executed at the similar margins. Thus, given the size of the current order book, these new margins may be reflected only after FY21, when execution of old
nomination based orders would be completed. We continue to like BEL for a long term play on defence sector given its strong execution in the past, robust order inflow guidance and strong
balance sheet strength. Given the recent correction in the stock, we continue to have a Buy rating on the stock with a target price of Rs.143 at 15x (maintained earlier multiple) FY20E EPS of
Rs.7.4 and adding cash per share of Rs.33. Any revision in target price would depend upon the general business momentum, changes in order inflow, execution issues and rollover of earnings
to next financial year.
Voltas (CMP: Rs.556): Voltas Ltd is one of India‟s leading engineering solution providers. While, the sales for the Unitary Cooling Product (UCP) segment remained weak during the quarter due
to erratic weather conditions, management commentary on the overall growth for the company remains positive on the back of strong traction for EMP business. Although the sales for the UCP
segment remained muted during the quarter, company continues to remain market leader (with increased market share of ~25.6% for Q2FY19) led by higher than industry growth during the
quarter. Moreover, company has also successfully launched new products under its recently formed Joint Venture with a Turkish major “Arcelik and management guided that the initial feedback
for the products was positive. We believe existing dealer and channel network in the ACs segment would be leveraged by the company for growth into other durable goods as well. On the EMP,
Voltas saw further expansion in EBIT margin on YoY basis during the quarter and expects EBIT margins to remain steady as slow moving orders move out of the backlog and newer projects
with better profitability come into execution. The company continues to have strong balance sheet and cash flow generation capability which would augur well for the capital requirement for the
entry into other consumer durable products. We have a Buy rating on the stock with a price target of Rs.719 which is 30x (maintaining earlier multiple) FY20E EPS of Rs.24. Any change in
earnings/price target would depend upon the order inflow/execution in domestic and international markets, margin improvement; scale up of the new JV, general business momentum and
rollover to the next financial year.
KEC International (CMP: Rs.287): Over the last couple of years, KEC has been able to diversify its revenue base, by gradually raising the contribution from the Railways and Cables segments.
Management expects order inflow in the domestic T&D to pick up on the back of orders from Power Grid as well as Private players. Indian Railways‟ long term plan to electrify ~35000 kms of
railway lines by FY20 improves the revenue visibility for the railway segment for KEC, given the leadership position in the railway overhead electrification segment. We believe, overall outlook for
the company continues to remain steady led by strong order book growth (up by 43.7% YoY at the end of Q2FY19) thus translating into healthy Book to bill ratio of 1.9x Trailing Twelve Month
(TTM) basis. We believe, expected improvement in order inflow, reducing debt profile, diversification of overall company revenue via both, diversified client base and segment base coupled with
expectation of improving ROCEs and ROE going ahead is likely to drive profitability for the company in the medium to long term. We have a Buy rating on the stock with the target price of
Rs.392 based on PE multiple of 15x (maintaining earlier multiple) FY20E EPS of Rs.26.1. Any earning/target price revision would depend on the ordering and tendering activities by domestic
T&D players, improvement in market share and changes in general business momentum.
State Bank of India (CMP: Rs.287): We recommend a Buy on the stock with the target of Rs.395 based on PBV multiple of 2x on FY20E core adjusted book value of Rs.182.4 and balance
value accruing from Subsidiaries. Any revision in the target price would depend on changes in the NPA profile, Capital dilution and momentum in the NPA resolution process.
Birla Corporation (CMP: Rs.624): During Q2FY19, the company has delivered strong volume growth on the consolidated basis driven by pickup demand in most of the regions
where the company operates. Although, profitability of the company was impacted due to high cost pressure, however on the positive side, uptick in realization was seen in most of
the markets where BCorp operates. Additionally, company‟s strategy of cross branding of production at the acquired Reliance plants has started to yield better profitability for the
company. We think with the economic growth picking up and sand unavailability issues in Uttar Pradesh and Bihar behind us coupled with election in the state of Rajasthan and
Madhya Pradesh by year end and General election towards the end of FY19; demand scenario is likely to improve in the near term. We think that the stock commands premium to
the current valuation due to visible synergy benefits between the acquired Reliance Cement plants (capacity 5.5 MTPA) and Standalone BCorp capacities and thereby expected
pick up in the valuations due to improvement in profitability and strong cash flow generation capability given the entry into high growing central regions via the acquisition. We have
a Buy rating on the stock with a revised price target of Rs.1325 which is 12xFY20E EV/EBITDA (average multiple for other medium to large cement players). However, any
changes to the price target would be hinged upon changes in business momentum/economic cycle, capex execution issues and acceleration of cost optimization initiatives.
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24
Recommended Stocks
ITC (CMP: Rs.283): ITC continued to report improvement in its overall FMCG business‟ performance amid challenging business environment due to pressure on the cigarette industry. Moreover, the company
was able to consolidate its position in some of the major categories in FMCG business and continue to enter into new categories in the FMCG business. In addition, the company has been aggressively
focusing on new launches in the existing business and entering into new markets in order to bring the incremental growth. We believe cigarette business may continue to witness improvement going ahead
given the stability starting to emerge post GST implementation, however, if there is any upward revision in GST rates that may force company to take price hike then the company might start to see pressure on
volumes again. However, ITC has been consolidating its leadership position in the Cigarette segment and continuing to improve its standing in key competitive markets across the country. Hence, Cigarette
segment should continue to perform well over the longer term on the back of healthy margins and strong brands available at various sizes. We maintain our positive stance on the company given the long-term
positive benefits of GST, expected improvement in FMCG business and steep discount as compared to its peers. Hence, we are maintaining our Buy rating on the stock with target price of Rs.350 at 30x
(maintaining earlier multiple) FY20E EPS of Rs.11.7. Any earning/target price revision would depend on the performance of FMCG business, any regulatory changes in Cigarette business and in general
business momentum.
Godrej Agrovet (CMP: Rs.507): GAVL, part of the Godrej group, is a well-diversified agri-business company with operations across various business verticals i.e. animal feed, crop protection, oil palm, dairy
and poultry and processed foods. Over the years, GAVL has continued to focus on improving its market share across all its business verticals, which are underpenetrated and are largely catered by
unorganized players, by leveraging on strong presence in these sectors. GAVL is also working on strategy to increase its revenue and profitability by extending its product pipeline by introducing innovative and
value added products and expanding its geographical presence across its business divisions. GAVL also intends to improve its cost efficiency and productivity by implementing effective and efficient operational
techniques in order to improve its margins in the long term. We have a positive view on the stock considering the strong parentage, leadership position in various divisions, improving volume growth, strong and
robust balance sheet. We maintain our Buy rating on the stock with the target price of Rs.734 based on a PE multiple of 30x (maintaining earlier multiple) FY20E EPS of Rs.24.5. Any earning/target price
revision would depend on the performance of its sub-divisions, improvement in market share and changes in general business momentum.
Thyrocare Tech Ltd (CMP:Rs.558): The company has seen some improvement in its growth on sequential basis in Q2FY19, driven by its pricing strategy. The management is hopeful of further improvement
in coming quarters. We remain long-term positive on the stock given the current structural drivers like low spending on Preventive and Wellness healthcare and rising urbanization, sedentary lifestyle, and
peaking stress levels leading to lifestyle diseases such as cancer, obesity, heart disease, diabetes, among others. With bulk of the market in the pathology segment being unorganised, there is significant
headroom for the organised sector to grow although the management expects it at a slower pace. Thyrocare being a pan India player with the clear focus on expanding its network both on diagnostic as well as
on imagining services business, it is well placed to grab this opportunity. Moreover, strong brand, lower pricing model, expanding the number of diagnostic tests and expanding the platforms also puts Thyrocare
in a favorable position. Thyrocare‟s well established brand image, huge opportunity size, robust return ratios and cash rich balance sheet supports our long term view. Hence we maintain our Buy rating on the
stock with the revised target price of Rs.813 based on a PE multiple of 30x (maintaining earlier multiple) FY20E EPS of Rs.27.1 (mainly due to reduction in equity due to buyback offer). Any earning/target price
revision would depend on the performance of its sub-segments, impact of its new strategy, change in regulation, delay in expansion plans and changes in general business momentum.
Phoenix Mills( CMP: Rs.622): PML continued to deliver strong set of numbers during Q2FY19 led by sharp rise in the rental income as more and more malls turn mature with rental income growing at faster
pace as compared to consumption growth. With the next leg of growth being partly funded via CPPIB deal and near completion of minority buyouts in existing malls, PML is expected to generate strong free
cash flows. We believe these free cash flows can be utilized to unlock development potential of 4.6 msf in its existing land parcels. On the industry dynamics for retail sector, as per FICCI and PWC report,
India‟s retail sector is expected to touch USD 1.3 trillion by 2020 from USDS 630 bn in 2015, growing at a CAGR of 16.7% over the same period (Source: PML Annual Report). The Government‟s initiatives for
relaxing Foreign Direct Investment (FDI) regulations in certain retail segments are providing further impetus for consumption growth. With increasing household incomes, consumer attitude towards
discretionary spending is gradually shifting and consumers are increasingly using quality and premium products. Thus we believe that India stands at an inflection point from where the retail consumption pie in
the country is set to grow at a much higher growth rate for the next decade and given the PML‟s leadership position in the mall business in India, it is best equipped to tap this huge opportunity going ahead.
Key growth drivers for PML in the form of i) doubling its mall portfolio to ~10-11 msf over the next few years, ii) focus on building retail mixed led commercial portfolio, iii) bottoming of real-estate sector and (iv)
improving dynamics for hospitality sector augurs well for the company. Given the healthy cash flow generating assets, reasonable valuations and positive long term outlook on the organized retail segment, we
continue to remain positive on the company and have a Buy rating on the stock with a target price of Rs.898 at 31x (maintained earlier multiple) FY20E EPS of Rs.29.0. Any earnings/target price revision would
depend upon a slowdown in retail business; slowdown in real estate business, any new policy or announcement by Government on the real estate policy frame work, change in the interest rate and changes in
general business momentum.
Mahindra and Mahindra (CMP: Rs.760): M&M continues to be a leader in the domestic Tractor industry with ~39% market share as of Q2FY19. The management expects domestic Tractor industry volume to
grow by 12-14% YoY in FY19. The management has reiterated its stance of focusing on building a strong product pipeline in both FES and Automotive segment by introducing new product every year and
further preparing itself in upcoming electric vehicle space by increasing the capex activity. We believe M&M is geared up to take on the competition and to grab the opportunity arising from ongoing
improvement in growth in auto industry and recovery in rural demand. We remain positive on the medium term potential of the company on the back of new product launches that is likely to drive revenue
growth for the company and on healthy return ratios of 15% plus (i.e, RoCE in FY18). Currently, we have a Buy rating on the stock with the revised target price of Rs.1037 at 16x (maintaining earlier multiple)
FY20E EPS of Rs.50.3 adding Rs.232 as value (revised) of subsidiaries at 30% holding company discount. Any earning/target price revision would depend on the performance of new launches, improvement in
market share, any regulatory changes, changes in the value of subsidiaries, rollover to next financial year and changes in general business momentum.
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25
Recommended Stocks Exide Industries (CMP: Rs.260): Exide is India‟s largest manufacturer of lead acid storage batteries and power storage solutions provider with strong presence in automotive, power, telecom, infrastructure
projects, computer industries, railways, mining, renewable energy and defence sectors. Going ahead, the steady demand for Automobile in India especially in passenger vehicle bodes well for Exide‟s Original
Equipment Manufacturers (OEM) segment. Further, the strong market share in Industrial segments of Solar, Backup Power, Manufacturing and Project sector may drive the volume growth with the expected
recovery in industrial capex cycle over the long term. The company is working on expanding its portfolio for emerging requirements like electric vehicles, hybrid cars and start-stop batteries and has recently added
e-rickshaw battery and completely sealed and maintenance-free battery in its portfolio. Recently, the management had highlighted that the company would be manufacturing lithium-ion batteries at the facility of
Tudor India in Gujarat in collaboration with Swiss company, „Leclanché‟. The company expects module and battery-pack assembly line to be operational by Q2CY19 and a lithium-ion cell production plant is
expected to be operational by mid-CY20. Further, it is focusing on capturing market share from the unorganized commercial vehicles and tractor battery markets with target to enhance customer outlet and launch
of nine new products in the aftermarket segment across categories and price points. The company is also expanding its reach in overseas markets like GCC (Gulf Co-operation Council) countries, South East
Asian countries and select African nations. The lead prices (key raw material) had been very volatile and would be the key parameter to watch out for in the near term. However, the management is working on
various cost cutting initiatives and improving the product mix to maintain its margins. Currently, we have a Buy rating on the stock with the target price of Rs.301 at 22x (maintaining earlier multiple) FY20E EPS of
Rs.12.5 and adding Rs.25 per share for the embedded value in Insurance business (as of March 2018). Any earning/target price revision would depend on the improvement in margin, changes in market share,
implementation of GST and its tax structure, value in Insurance business and changes in general business momentum.
Reliance Industries (CMP: Rs.1,156): RIL continues to be on track to improve the profitability on the back of improved performance for the Petrochemical business despite muted performance for the Refining
business. Petrochemical business continued its strong performance during the quarter, clearly indicating Reliance‟s dominance in the segment. Strong ramp up in JIO paid subscriber base during last few quarters
along with recent announcement to buy stakes in Multi Service operators (MSOs) companies Hathway and Den has raised the revenue visibility for the telecom venture going ahead. Although Refining margins
have come off slightly in the last few quarters, we believe benefits of Petcoke Gasification plant is likely to be seen from FY20. Key monitorable for Reliance going ahead would be subscriber ramp-up and
average revenue per user (ARPU) in the telecom business with expected ramp up of the petcoke gasifier over the next six months to further improve the profitability for petrochemical business. We have revised
our earnings estimates to incorporate the sharp depreciation of Indian Rupee (INR) and rise in the crude oil prices and currently we have a Buy rating on the stock with a price target of Rs.1455 at 15x (maintained
earlier multiple) FY20E EPS of Rs.70 and balance value accruing from RJIO, Shale Gas and Retail Business. Any changes in the estimates/target price would depend upon trend in crude price, currency
movement, gas price & GRM and changes in capex and general business momentum.
Petronet LNG (CMP: Rs.213): PLNG remains a structural story of India‟s increasing gas demand from key users like power stations, fertilizers companies, refineries and petrochemical companies, city gas
distribution for compressed natural gas (CNG), domestic purpose usage and steel manufacturers. Moreover, we do not see any meaningful competition for Dahej LNG terminal from upcoming Mundra LNG
terminal (expected to commission by end of 2018) given PLNG competitive edge in terms of lower re-gas tariff. While the Kochi terminal is currently underutilized, a slight uptick in the utilization levels for Kochi
terminal by FY19/20 and beyond would result in sharp rise in the earnings for the company given the improving utilization for the existing capacities. Thus we believe improving utilization at Kochi and additional
2.5 MTPA capacity additions at Dahej terminal is likely to further improve the earnings and profitability for PLNG. We believe visibility on PLNG‟s medium/long term earnings on the back of huge gas demand-
supply gap in India, volume growth via Kochi ramp up and gradual capacity addition at Dahej along with earnings growth boosted by annual re-gas charge escalation of 5% YoY is likely to drive the margins as
well as profitability in future. Currently, we have a Buy rating on the stock with the target price of Rs.316 based on PE multiple of 16x (maintained earlier multiple) FY20E EPS of Rs.19.8. Any earnings/target price
revision would depend upon the fluctuation in LNG prices, any disruption from the upcoming competition; scale up of existing terminal, any decision by government on re-gas tariffs and general changes in the
business scenario.
Rating Expected to
Buy Appreciate more than 10% over a 12 to 15 month period
Hold Appreciate below 10% over a 12 to 15 month period
Under Review Rating under review
Exit Exited out of the Model Portfolio
Rating Interpretation
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26
Fixed Income
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27
G-sec rally continued in November 2018...
Domestic G-sec prices rallied (yields declined) during November 2018; wherein yield on the benchmark 10 year G-sec 7.17% 2028 bond closed at
7.61% on 30 November 2018 compared to 7.85% on 31 October 2018.
Rally in G-secs was largely on account of:-
OMO Purchases by the RBI in November 2018 and announcement of further OMO purchases in December 2018.
Decline in crude oil Prices and Strengthening of Rupee against the USD.
Decline in CPI inflation to 13 month low.
Comments from FOMC‟s November 2018 meeting, indicating that Federal Funds rate may be closer to the neutral rate.
On the negative side, India‟s fiscal deficit for April-October 2018 stood at Rs 6.49 tn, which is ~103.9% of the budgeted target for FY19.
While sentiments in G-sec markets remained positive, corporate bond markets continued to grapple with caution following the IL&FS Ltd. defaults
since September 2018.
This resulted in better performance of G-sec markets compared to corporate bond markets.
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28
Corporate bond yields declined less compared to G-sec yields… …tracking caution on credit ratings of companies and tight liquidity conditions
After staying elevated at the start of the month, corporate bond yields declined towards the later part of the month, tracking liquidity
infusion by the RBI.
Caution on the NBFC and Housing Finance sectors and tight liquidity conditions kept the corporate bond yields elevated for the first
half of the month.
However RBI‟s liquidity support through OMOs and other measures announced for easing liquidity crunch in the NBFC sector led to
some decline in the bond yields towards the later part of the month.
Bond spreads at the very short end of the yield curve declined; however short to longer end yields witnessed a rise in bond spreads.
Spreads between Non PSU AAA HFCs and G-secs
31-Aug-18 28-Sep-18 31-Oct-18 30-Nov-18
1 Years 112 125 183 171
2 Years 91 132 168 166
3 Years 74 122 133 161
5 Years 69 116 129 142
10 Years 80 97 119 132
Spreads between Non PSU AAA HFCs and G-secs
Source:-IDFC MF
Source:-IDFC MF
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29
Crude oil prices decline sharply in November 2018… …big positive for domestic macros and bond yields
Brent crude oil price declined sharply in November 2018 and closed at 58.44/Barrel on 30 Nov 2018 compared with 73.86/Barrel on 31 Oct 2018.
On a MoM basis crude oil prices declined by ~21% compared to a decline of ~ 10.96% MoM in Oct 2018.
Rupee also strengthened in Nov 2018 by about ~6% MoM as compared to depreciation of ~ 2% in Oct 2018.
After two months of net selling, FPIs turned net buyers in the month of Nov 2018 to the tune of Rs.~56 bn in Nov 2018, compared to net selling of Rs.~100 bn in Oct
2018.
After declining to 5 month low of USD 13.98 bn in Sept 2018, trade deficit inched up in Oct 2018 and stood at USD 17.13 bn.
While it is being anticipated that CAD for Q2FY19 could be closer to 3% of GDP, if crude oil prices stay at current levels or decline further, it could have some
positive impact on CAD going forward.
OPEC Decision on crude oil production will be an important variable as it will give a sense on direction of crude oil prices in the near term.
Source:-Bloomberg Source:-Bloomberg
Source:-Bloomberg
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30
US FOMC gives hints of less aggressive monetary tightening…
In November 2018, the US Fed kept the Federal Funds rate unchanged in the range of 2.00-2.25%.
While maintaining a pause on interest rates in Nov 2018, minutes of the meeting showed hints of less aggressive interest rate hikes going forward.
Minutes of the Nov 2018 FOMC meeting show that US Fed is confident in continuing with its monetary policy normalization.
The minutes of the Nov 2018 FOMC meeting stated that “….a few participants, while viewing further gradual increases in the target range of the
federal funds rate as likely to be appropriate, expressed uncertainty about the timing of such increases. A couple of participants noted that the
federal funds rate might currently be near its neutral level and that further increases in the federal funds rate could unduly slow the expansion of
economic activity and put downward pressure on inflation and inflation expectations…”
Release of the minutes of the FOMC meeting led to decline in the US 10 year treasury yield below the 3% mark for the first time since September
2018.
Spread between the US and India 10 year Government bond yields continued to remain attractive stood at ~462 bps as of 30 Nov 2018. Compared
to ~471 bps as on 31 Oct 2018.
Source: - RBI Source: - RBI
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CPI inflation for October 2018 declines tracking lower food inflation…
Inflation based on Consumer Price Index (CPI) for the month of October 2018 declined to a 13
month low and came in at 3.31% YoY compared to 3.70% YoY (revised) in September 2018.
CPI inflation continued to remain below the RBI‟s medium term target of 4% for the third month in a
row.
Decline in CPI inflation was mainly on account of decline in food inflation which witnessed deflation
in the month of October 2018.
CPI food prices deflated by 0.86% YoY in October 2018 compared to an inflation of 0.51% YoY in
the previous month.
Within the food segment, vegetable prices deflated by 8% YoY compared to a deflation of 4.21%
YoY in September 2018.
CPI core inflation however, increased in October 2018 and came in at 6.22% YoY compared to
5.81% YoY in September 2018.
Source:-Ministry of Statistics and Program Implementation
Sept.18 Oct.18
Cereals and products 9.67% 2.90% 2.59%
Meat and fish 3.61% 2.39% 3.02%
Egg 0.43% 3.76% 2.29%
Milt and products 6.61% 2.36% 0.92%
Oils and fats 3.56% 3.13% 2.18%
Fruits 2.89% 1.68% 0.35%
Vegetables 6.04% -4.21% -8.00%
Pulses and products 2.38% -8.65% -10.28%
Sugar and Confectionary 1.36% -6.42% -7.64%
Spices 2.50% 2.88% 2.79%
Non-alcoholic beverages 1.26% 1.55% 2.33%
Prepared meals, snacks, sweets etc 5.55% 4.41% 3.78%
Food and beverages 45.86% 1.01% -0.14%
Pan, tobacco and intoxicants 2.38% 5.57% 6.13%
Clothing 5.58% 4.68% 3.52%
Footwear 0.95% 4.27% 3.28%
Clothing and footwear 6.53% 4.64% 3.48%
Housing 10.07% 7.07% 6.55%
Fuel and light 6.84% 8.63% 8.55%
Household goods and services 3.80% 4.80% 6.06%
Health 5.89% 5.97% 7.92%
Transport and communication 8.59% 6.51% 7.72%
Recreation and amusement 1.68% 5.16% 4.99%
Education 4.46% 6.40% 6.24%
Personal care and effects 3.89% 4.14% 5.23%
Miscellaneous 28.32% 5.65% 6.73%
General Index (All Groups) 100.00% 3.70% 3.31%
Consumer Food Price Index 39.06% 0.51% -0.86%
Core CPI Inflation 5.81% 6.22%
Inflation (YoY)
CPI Inflation
Description Weights
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32
Fiscal deficit for April-Oct 2018 overshoots the budget estimate…
Source:- http://pib.nic.in/
Government‟s fiscal deficit for the period April-Oct 2018 touched ~103% of the budget estimate for FY19.
During the same period last year fiscal deficit was at ~96% of the budget estimate for FY18.
The total expenditure for the April-Oct 2018 stood at 56% of the budget estimate for FY19 compared to 60% in FY18.
Revenue receipts for April-Oct 2018 stood at ~46% of the budget estimate for FY19 as against ~48% during the same period last year.
On the other hand, collections under Goods and Services Tax (GST) in November 2018 declined and stood at Rs.~976 bn compared to the
Rs.1 trillion mark in the previous month.
The government continued to reiterate its commitment to achieve the fiscal deficit target of 3.3% of GDP for FY19
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33
Banking System liquidity tightens further… …RBI continues to support liquidity through regular OMO purchases
Domestic liquidity conditions continued to remain tight in Nov 2018. However towards the end of
the month, liquidity deficit declined helped by regular OMO purchases by the RBI.
Liquidity as measured by the RBI‟s Liquidity Adjustment Facility (LAF) stood at a daily average
deficit of Rs.~846.26 bn compared to deficit of Rs.~615.58 bn in the previous month.
The RBI conducted Open Market Operations (OMO) purchase of G-secs for an aggregate amount
of Rs.~500 billion in November 2018 in order to provide support to domestic liquidity.
Credit growth outpacing deposit growth, has also been adding to liquidity tightness. As of
9 Nov 2018 Banks‟ credit growth stood at 14.88% YoY; where as deposits grew by 9.14% YoY.
Gap between credit and deposits growth continued to widen; wherein credit-deposit ratio stood at
77.05% as on 30 Nov 2018 compared to the average of 75.58% seen in the financial year so far.
Rise in Currency in Circulation also continued to exert pressure on system liquidity.
The RBI conducted Open Market Operations (OMO) purchase of G-secs for an aggregate amount
of Rs.500 bn in Nov 2018 in order to provide support to domestic liquidity.
Source: - RBI
Source: - RBI
Source: - RBI
Source: - RBI
Source: - RBI
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Source:- IDFC Mutual Fund
Source:- IDFC Mutual Fund
Term Spreads Sep-18 Oct-18 Nov-18
1-5 Years 54 49 37
1-10 Years 49 51 50
5-10 Years -6 2 13
G-sec yields declined across the yield curve in November 2018; with the yield curve continuing to remain relatively flat.
The shorter end of the yield curve declined due to RBI‟s liquidity support; whereas longer end declined with rising expectations of softer money
by the RBI in near term tracking improvement in important macro variables.
The term spread between 1 and 5 years G-secs continued to contract marginally; whereas spread between 1 and the 10 years G-secs
remained almost at similar as the previous month.
Decline in the yields has been higher at the short to medium term segments of the yield curve, compared to the very short and longer ends.
The 1 year G-sec declined by about 44 bps from end of September 2018 to end November 2018; whereas the 5 years G-sec yield decline by
about 61 bps.
The 10 year G-sec yield declined by about 42 bps from end of September 2018 to Nov 2018 end.
The G-sec yield curve continues to remain flat…
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35
Key Risks and Variables to watch out for…
Domestic Variables
Rupee Movement:- Rupee movement will be a key variable
to watch out for, as it plays an important role in the trajectory
of other macro economic fundamentals in the economy.
Domestic Macros:- As bond yields are driving by evolving
macro economic variables, trajectory of macro economic
variables like inflation, CAD and fiscal deficit amongst others
are likely to give direction to domestic bond yields.
Liquidity Conditions:- With the sustained tightness in system
liquidity, RBI has been conducting OMO purchases regularly
in the recent past. Thus, movement in system liquidity and
RBI‟s response to the same is likely to influence the bond
yields across the yield curve as seen recently.
MSP impact on food inflation:- Government‟s procurement
policy needs to be tracked very closely to in order to assess
the impact of hike in MSPs on food inflation.
Global Variables
OPEC Decision on crude oil production:- This will be an
important variable as it will give a sense on direction of
crude oil prices in the ear term.
Global growth and inflation scenario:- Global monetary
polices are likely to take shape tracking global economic
growth and inflation; which in turn can influence the
monetary policy domestically
Commodity Prices:- Especially crude oil prices are likely to
give direction to bond yields, as crude oil prices have a
bearing on domestic macro economic variables like inflation
and Current Account Deficit.
Global trade tensions and geopolitical tensions:- These can
have a bearing on the global growth scenario thus altering
the current perceived path of the monetary policies of some
of the major developed nations, as well as domestically.
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36
The liquidity conditions have relatively eased post RBI‟s OMO purchases. Given the RBI‟s announcement of OMO purchase of G-secs to the tune of Rs. 400 bn
for Dec 2018, liquidity conditions may further improve. That being said, with credit growth outpacing deposit growth and rising currency in circulation in an
election year, is likely to keep the pressure on system liquidity.
Factors impacting domestic inflation have turned positive over the past few months. Not only has food inflation remained benign, crude oil prices have also
declined sharply. Prices of other commodities have also largely remained muted. Additionally at this point the Minimum Support Prices (MSPs) don‟t seem to be
inflationary in nature.
Rupee also witnessed strengthening in Nov 2018. Improvement seen in some of the macro economic variables coupled with government's commitment to stick
to its fiscal deficit target, may provide support to Rupee.
Current Account Deficit continues to remain a cause of concern; with CAD for Q2FY19 being expected closer to 3% of GDP. However decline in crude oil prices
and strengthening of Rupee may turn things around for domestic CAD.
The government has reiterated its commitment to stick to the fiscal deficit target for FY19. This is a positive for bond markets. Any further transfer of surplus by
the RBI to government will also be an important variable to track. Not only the fiscal deficit target but the quality of the fiscal math will be important for bond
markets.
While monetary tightening in US is expected to continue, with recent comments in the FOMC meeting minutes regarding Fed being closer to its neutral rate, it
will important to track any subtle changes in language of the US Fed to understand the path of its monetary policy. Also with the recent downward revision in
global growth forecasts it will be extremely important to track the trajectory of global growth, which in turn can give a sense of global monetary policies and
interest rate scenario.
Global Geo-political tensions have imparted volatility to global capital markets including India. Thus, going forward also global geo-political developments are
likely to continue to keep Indian capital markets volatile.
While yields at the longer end of the yield curve have declined, volatility is likely to continue tracking the movement in crude oil prices, movement in Rupee,
outcome of the upcoming state elections and global geo-political developments. That being said some of the variables that have an impact on longer end yields
like, domestic inflation, OMO purchases by RBI, Crude oil prices and Rupee movement amongst others have turned positive, which may prevent the yields from
rising and may even lead to some decline.
Short term rates have also declined tracking liquidity support by the RBI, which has benefitted investment strategies focusing on the shorter end of the yield
curve. Going forward the RBI is likely to continue with its liquidity support measures. Thus, the Shorter end of the yield curve is expected to continue to benefit
from the same.
Conservative investors who do not wish to see volatility in returns should continue to look at debt funds that invest at the very short end of the yield curve;
investors can also look at strategies that allow investors to lock in the current attractive short term rates.
Thus , investments into Short Term Funds can be considered with an investment horizon of 12 months and above.
Investors looking to invest with a horizon of up to 3 months can consider Liquid Funds, while Arbitrage Funds and Ultra Short Duration Funds can be considered
for a horizon of 3 months and above.
Investors looking to lock in current yields can invest in Fixed Maturity Plan (FMPs).
Investor who are comfortable with intermittently volatility, can look also at strategies that focus at the longer end of the yield curve. i.e. High duration funds.
Fixed Income Outlook
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37 37
We recommend investors to rebalance/realign the portfolios according to the recommended asset allocation
On Equity Funds:
Global headwinds like trade war and interest rate hike by the US coupled with domestic concern of depreciating currency, FPI outflow and
impact of default by IL&FS to other companies dampened the market sentiments.
In India, focus on infra spending by the government, improved urban consumption, rebounding exports and better farm income has the
potential to shore up the economy in the medium term. With Q1FY19 GDP growth at 8.2% YoY, we think that the momentum is likely to
continue on the back of government capex, better domestic demand, and favorable demographics.
Strong USD, increasing global interest rates, trade wars and expectation of higher foods prices could have negative impact on inflation,
currency and interest rates which may cause volatility in the equity markets.
On the positive side, the key demand indicators are showing continued traction and there seems to be some pricing power returning to
businesses, as is being witnessed in the strong revenue growth of corporates in Q2FY19 results.
Recent correction in market have helped valuations to improve. However, earnings growth needs to persist for markets to move higher.
From an Equity Mutual Fund perspective, investors should look at Large cap Funds for fresh investments and SIP into Midcap and Small
caps stocks/funds can begin with the longer horizon.
The Equity investment strategy, continues to remain at 50% Lumpsum and rest 50% staggered over the next 4-5 months.
On Fixed Income:
Investments into Short Term Funds can be considered with an investment horizon of 12 months and above.
Investors looking to invest with a horizon of up to 3 months can consider Liquid Funds, while Arbitrage Funds and Ultra Short Duration
Funds can be considered for a horizon of 3 months and above.
Investors looking to lock in current yields can invest in Fixed Maturity Plan (FMPs).
Investor who are comfortable with intermittently volatility, can look also at strategies that focus at the longer end of the yield curve. i.e. High
duration funds.
Investment Strategy
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38
Equity Mutual Funds
Large/Multi Cap Oriented Funds
1. Axis Focused 25 Fund - The fund maintains a concentrated portfolio of 25 high conviction stocks and mainly invests in top 200 companies by market capitalization
2. Reliance Large Cap Fund – An actively managed large cap equity fund
3. ICICI Prudential Bluechip Fund - A conservative large cap fund
4. Kotak Standard Multicap Fund - An actively managed multi cap fund investing across select sectors with large cap bias
5. Aditya Birla Sun Life Frontline Equity Fund – A conservative large cap equity fund
Mid/Small Cap Oriented Funds
1. HDFC Small Cap Fund - The fund is a small cap fund that invests predominantly in small cap companies.
2. SBI Focused Equity Fund – An actively managed large cap equity fund
Balanced / Hybrid Funds
1. L&T Hybrid Equity Fund – An aggressive hybrid fund
2. ICICI Prudential Equity & Debt Fund – An aggressive hybrid fund
3. SBI Equity Hybrid Fund – An aggressive hybrid fund
Equity Savings Funds
1. Kotak Equity Savings Fund - The un-hedged equity exposure is maintained in the range of 20% to 40% of the portfolio
2. HDFC Equity Savings Fund – The un-hedged equity exposure of the fund is maintained upto 40% of the portfolio with flexibility to invest across market capitalisation
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39
Performance of Mid Cap Oriented Funds
The Mid Cap oriented recommended funds have outperformed not only the Mid Cap Index but also the broader indices like
Nifty 500 index and Nifty 50 index over the longer period from 3 years to 5 years.
Over the last 3 years, the recommended mid cap oriented funds have outperformed the Nifty Midcap 100 index. The
recommended funds delivered an average returns of around 12% (CAGR) against the Nifty Midcap 100 index which delivered
close to 10% (CAGR) returns.
Currently, the mid cap stocks are trading at relatively higher valuations and are expected to remain volatile over the near term,
however, the mid cap stocks are expected to perform better over longer period.
Returns (%) as on 30 November 2018. Returns are absolute for < = 1year and CAGR for > 1 year.
Source for entire data stated above is ICRA Online Ltd. (For Disclaimer of ICRA Online Ltd, refer http://www.icraonline.com/legal/standard-disclaimer.html)
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40
Performance of Infrastructure Oriented Funds
The Union Cabinet, in the month of October 2017 announced Bharatmala Pariyojana - an initiative to add 35000km of new highways, 9000 km of
economic corridor, 6000km of inter-corridor, 2000km of border roads and 10000km of the national highway with an total outlay of Rs.6.92 trillion over the
next five years.
As per Transport Minister Nitin Gadkari, over 9829 kms of National Highways were constructed during FY18, up by ~20% YoY over 8231 kms
constructed in FY17. He further added that 17055 kms of road length was awarded in FY18 against 15948 kms in FY17. For FY19, the ministry has set a
construction target of 16420 kms which translates into average length of roads constructed per day rising from 27 kms in FY18 to 45 kms in FY19.
Around 20000 kms will be awarded to reach this construction target.
In the Union Budget for FY19, the allocation for Roads, Urban development, Shipping, Aviation and Railways together stood at Rs.1.84 trillion. Total
investment in the Road sector is projected at Rs.710 bn reflecting a growth of 16% over FY18RE. For FY19BE, the total capital and development
expenditure of Railways has been pegged at Rs.1.48 trillion including Rs.550 bn provided by the government.
The Budget also proposed creation of 5.1 mn rural houses and 3.7 mn urban houses in FY19 under the Pradhan Mantri Awas Yojna (PMAY). About
4.354 mn rural houses have been completed in the last three years while 5.495 mn urban households have been constructed under the PMAY scheme.
Average returns of the recommended Infrastructure funds have outperformed not only the Nifty 50 index but also the Nifty Infrastructure index over the
last three years to five years period and expected to perform better over the long term investment horizon.
Returns (%) as on 30 November 2018. Returns are absolute for < = 1year and CAGR for > 1 year. Source for entire data stated above is ICRA Online Ltd. (For Disclaimer of ICRA Online Ltd, refer
http://www.icraonline.com/legal/standard-disclaimer.html)
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41
Invest in Balanced / Hybrid Funds for diversification
Scheme Name YTM (%)*
Average*
Maturity
(years)
Modified*
Duration
(years)
1 Y % 3 Y % 5 Y %
HDFC Balanced Advantage Fund - Growth 9.54 3.07 2.44 -4.16 9.47 15.97
Aditya Birla Sun Life Equity Hybrid 95 Fund -
Growth 9.66 3.01 1.98 -3.99 9.13 15.28
L&T Hybrid Equity Fund - Reg - Growth 8.60 2.41 1.90 -1.77 8.79 16.15
ICICI Prudential Equity & Debt Fund - Growth 8.49 1.09 0.88 -1.26 11.12 16.15
SBI Equity Hybrid Fund - Growth 8.49 2.92 2.14 0.14 9.32 15.68
HDFC Hybrid Equity Fund - Growth 8.46 3.51 2.62 -1.23 10.51 17.01
NIFTY 50 Hybrid Composite Debt 65:35
Index -- -- -- 6.66 10.81 11.89
The primary investment objective of Balanced / Hybrid funds is to invest in equities which broadly remains in the range of 65% to 80%, while the balance is
invested in debt securities.
During the bull run, the funds might underperform the pure equity diversified funds as these funds tend to have some exposure into debt instruments. The
funds maintain a balance between equity and debt investment and thereby help in reducing the overall risk of the portfolio as compared to equity funds.
In general, the equity investment strategy can be an active management strategy across market capitalization. The debt investment strategy can be across
fixed income securities including G-secs. Certain funds dynamically manages the equity and debt exposure. The debt portfolio helps the funds during the fall
in equity market and reduces the overall beta of the portfolio. Also, the bond portfolio is expected to generate capital gains in a falling interest rate scenario.
The recommended balanced / hybrid funds have outperformed Nifty 50 index and NIFTY 50 Hybrid Composite Debt 65:35 index over the last 5 years period.
The recommended balanced funds on an average have delivered around 16% returns over the past 5 years, whereas Nifty 50 and NIFTY 50 Hybrid
Composite Debt 65:35 indices both have delivered average returns of around 12% each during the same period.
Balanced / Hybrid funds are subject to equity taxation.
*Portfolio data as of 31 October 2018. Returns (%) as on 30 November 2018. Returns are absolute for < = 1year and CAGR for > 1 year.
Source for entire data stated above is ICRA Online Ltd. (For Disclaimer of ICRA Online Ltd, refer http://www.icraonline.com/legal/standard-disclaimer.html)
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42
Arbitrage Funds: Introduction and Advantages
Buying the securities in one market and selling the same in another market simultaneously to take advantage of
a temporary price differential is called arbitrage.
E.g. Assume stock price of ABC Ltd is at Rs.190/‐ in the cash
market. This stock is also traded in the derivatives segment,
where its future price is Rs.197/‐ In such a case, one can
make a risk‐free profit by selling a futures contract of ABC Ltd
at Rs.197/‐ and simultaneously buy an equivalent number of
shares in the equity market at Rs190/-.
On settlement day, it wouldn‟t matter which direction the stock
price has taken in the interim. Because on the expiry day
(settlement date) the price of equity shares and their futures
tend to converge.
The cash market price converges with the futures price at the end of the month.
Note: The above simulation is for illustration purposes only and should not be constructed as a promise or minimum returns or safeguard of capital.
Source: HDFC Mutual Fund
Advantages:
Generate income through arbitrage opportunities arising out
of pricing mismatch in a security between different markets
or as a result of special situations.
Completely hedged positions, neutralizes market risk
(volatility) and targets absolute returns irrespective of market
conditions.
Enhance portfolio returns using different trading strategies
within derivatives segment.
Balance of safety, returns and liquidity
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43
Equity Savings Fund - Positioned Between MIP & Balance Fund
Key Advantages of Equity Savings Fund:
Introduction:
The Equity Savings funds endeavors to provide moderate volatility and regular income through investment into arbitrage
opportunities and fixed income securities. At the same time, to provide a higher growth potential as compared to an arbitrage
fund or a debt fund, the fund also invests some exposure into equity stocks. Thus, the equity exposure including equity
arbitrage allocation would be more than 65%, hence equity taxation would be applicable.
However, with higher equity allocation, the volatility of these funds are higher as compared to MIP or pure debt
funds.
Tactical Equity Allocation: Potential capital
appreciation through tactical allocation in Equity
Market
Aims at Regular Income: Regular income through
investments in Fixed Income and Arbitrage
Opportunities
Tax Advantage: The Equity Savings fund are
applicable for equity taxation even with moderate
participation in pure equity.
Diversification: The Equity Savings fund have well
diversified portfolio by investing in different asset
classes like Equities, Equity Arbitrage Opportunities,
and Fixed income.
Equity Savings Fund
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44
Recommended Equity Mutual Funds – Performance
Theme Scheme Name SEBI Categorisation 1M 3M 6M 1Y 2Y 3Y
Large Cap, Aggressive Axis Focused 25 Fund - Growth Focused Fund 6.69 -10.99 -4.16 4.17 18.77 15.22
Large Cap, Conservative Reliance Large Cap Fund - Growth Large Cap Fund 4.41 -6.28 2.96 1.38 15.93 11.61
Large Cap, Conservative ICICI Prudential Bluechip Fund - Growth Large Cap Fund 3.46 -7.40 -0.05 1.09 13.46 11.64
Large Cap, Conservative Kotak Standard Multicap Fund - Reg - Growth Multi Cap Fund 6.45 -7.39 0.65 0.90 13.94 12.94
Multi Cap, Aggressive Invesco India Contra Fund - Growth Contra Fund 5.58 -8.48 -1.94 1.19 17.37 14.23
Multi Cap, Aggressive ICICI Prudential Multicap Fund - Growth Multi Cap Fund 2.87 -8.14 1.97 2.43 11.43 11.00
Multi Cap, Aggressive SBI Large & Midcap Fund - Growth Large & Mid Cap Fund 5.14 -5.98 -0.60 -3.00 12.99 10.17
Multi Cap, Conservative Tata Equity P/E Fund - Reg - Growth Value Fund 5.40 -10.15 -6.44 -5.14 12.71 14.32
Multi Cap, Conservative SBI Magnum Multi Cap Fund - Growth Multi Cap Fund 6.33 -8.30 -3.78 -3.76 11.58 11.25
Multi Cap, Conservative HDFC Capital Builder Value Fund - Growth Value Fund 6.30 -7.99 -2.74 -3.23 14.88 11.66
Multi Cap, Conservative Aditya Birla Sun Life Equity Fund - Growth Multi Cap Fund 5.98 -6.64 -1.13 -0.86 11.67 13.88
Multi Cap, Conservative UTI Equity Fund - Growth Multi Cap Fund 5.55 -11.54 -2.50 5.90 13.66 10.20
Mid Cap, Aggressive HDFC Small Cap Fund - Growth Small cap Fund 1.76 -8.62 -9.18 -4.57 19.29 16.06
Mid Cap, Aggressive L&T Midcap Fund - Reg - Growth Mid Cap Fund 4.30 -9.08 -7.64 -10.10 13.65 13.29
Mid Cap, Aggressive SBI Focused Equity Fund - Growth Focused Fund 4.23 -8.52 -5.87 -2.59 13.36 11.82
Infra Sector, Aggressive L&T Infrastructure Fund - Reg - Growth Sectoral/Thematic 4.07 -8.91 -8.17 -13.44 14.31 13.45
Aggressive Balanced/Hybrid HDFC Balanced Advantage Fund - Growth Dynamic Asset Allocation
or Balanced Advantage 1.82 -5.08 0.43 -4.16 8.36 9.47
Conservative Balanced/Hybrid L&T Hybrid Equity Fund - Reg - Growth Aggressive Hybrid Fund 3.63 -5.67 -3.12 -1.77 9.77 8.79
Aggressive Balanced/Hybrid ICICI Prudential Equity & Debt Fund - Growth Aggressive Hybrid Fund 1.40 -4.61 0.25 -1.26 9.40 11.12
Conservative Balanced/Hybrid SBI Equity Hybrid Fund - Growth Aggressive Hybrid Fund 4.12 -4.26 -0.63 0.14 9.96 9.32
Equity Savings Fund Kotak Equity Savings Fund - Reg - Growth Equity Savings 2.28 -1.24 2.28 4.81 8.65 8.18
Nifty 50 6.65 -6.85 2.47 6.36 15.00 11.07
Nifty Midcap 100 3.78 -11.83 -7.76 -12.02 8.36 9.72
S&P BSE 200 6.04 -8.10 0.17 2.19 14.03 11.18
Nifty Infrastructure 5.13 -5.08 -7.40 -12.23 5.15 3.66
NIFTY 50 Hybrid Composite Debt 65:35 Index 5.01 -3.42 3.71 6.66 12.12 10.81
Returns (%) as on 30 November 2018. Returns are absolute for < = 1year and CAGR for > 1 year.
Source for entire data stated above is ICRA Online Ltd. (For Disclaimer of ICRA Online Ltd, refer http://www.icraonline.com/legal/standard-disclaimer.html)
______________________________________________________________________
45
Fixed Income Options
______________________________________________________________________
46
Performance of recommended Long Duration/Dynamic Bond Funds
Please note that returns data for Crisil indces is not available.
Returns (%) as on 30 November 2018. Returns are absolute for < = 1year and CAGR for > 1 year. Portfolio as of 31 October 2018.
Source for entire data stated above is ICRA Online Ltd. (For Disclaimer of ICRA Online Ltd, refer http://www.icraonline.com/legal/standard-disclaimer.html)
Scheme Name SEBI
Categorisation
AAA &
Equivalent
Avg.
Maturity
(Yrs)
Portfolio
Yield (%)
Returns (%)
3 Mths 6 Mths 1 Year 2 Years 3 Years
Aggressive Funds
IDFC D B F - Reg - Growth (Re-Launched) Dynamic Bond 100.00% 3.34 8.31 3.36 4.67 3.87 3.02 7.26
UTI Bond Fund - Growth Medium to Long
Duration Fund 75.13% 3.30 8.94 0.89 1.79 1.81 2.27 6.77
Reliance Dynamic Bond Fund - Growth Dynamic Bond 100.00% 4.14 8.28 2.01 3.04 2.06 1.85 6.66
Conservative Funds
ICICI Prudential All Seasons Bond Fund - Growth Dynamic Bond 63.57% 1.42 8.73 1.48 3.14 4.61 4.13 8.79
UTI Dynamic Bond Fund - Reg - Growth Dynamic Bond 84.77% 3.15 8.72 1.05 2.23 2.78 3.16 7.64
Kotak Dynamic Bond Fund - Reg - Growth Dynamic Bond 81.15% 3.35 8.97 2.22 4.33 5.23 4.71 8.43
ICICI Prudential Bond Fund - Growth Medium to Long
Duration Fund 95.80% 3.12 8.62 1.66 3.20 3.18 3.81 6.69
SBI Dynamic Bond Fund - Growth Dynamic Bond 100.00% 2.47 7.47 2.42 3.31 3.09 3.21 7.68
NIFTY Short Duration Debt Index -- -- -- 1.88 3.80 5.67 6.25 7.21
ICRA Composite Bond Fund Index -- -- -- 3.03 4.73 4.10 4.38 7.80
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47
Performance of recommended Short Duration Funds
Please note that returns data for Crisil indces is not available
Returns (%) as on 30 November 2018. Returns are absolute for < = 1year and CAGR for > 1 year. Portfolio as of 31 October 2018.
Source for entire data stated above is ICRA Online Ltd. (For Disclaimer of ICRA Online Ltd, refer http://www.icraonline.com/legal/standard-disclaimer.html)
Scheme Name SEBI Categorisation AAA &
Equivalent
Avg.
Maturity
(Yrs)
Portfolio
Yield (%)
Returns (%)
3 Mths 6 Mths 1 Year 2 Years 3 Years
Aggressive Funds
ICICI Prudential Banking & PSU Debt Fund - Reg - Growth Banking and PSU Fund 82.42% 1.17 8.75 1.48 3.32 4.68 4.83 7.87
HDFC Corporate Bond Fund - Growth Corporate Bond Fund 100.00% 1.73 8.87 1.94 3.92 5.28 5.69 7.69
Reliance Banking & PSU Debt Fund - Reg - Growth Banking and PSU Fund 85.67% 1.57 8.74 1.98 3.82 5.14 5.31 7.27
DSP Banking & PSU Debt Fund - Reg - Growth Banking and PSU Fund 100.00% 1.87 8.01 2.04 3.85 5.06 5.04 7.25
Conservative Funds
ICICI Prudential Corporate Bond Fund - Reg - Growth Corporate Bond Fund 100.00% 1.05 8.55 1.73 3.67 5.56 5.71 7.42
Kotak Corporate Bond Fund - Std - Growth Corporate Bond Fund 100.00% 1.14 9.16 1.80 3.84 6.77 6.71 7.73
HDFC Short Term Debt Fund - Growth Short Duration Fund 93.85% 1.33 9.02 1.88 3.90 6.15 6.37 7.46
ICICI Prudential Short Term Fund - Growth Short Duration Fund 93.75% 1.25 8.62 1.65 3.37 4.77 5.17 7.50
SBI Banking and PSU Fund - Growth Banking and PSU Fund 79.52% 1.29 8.84 1.90 3.83 6.75 6.54 7.24
Aditya Birla Sun Life Corporate Bond Fund - Reg - Growth Corporate Bond Fund 87.94% 2.18 8.82 2.26 4.14 6.02 6.08 7.81
UTI Banking & PSU Debt Fund - Reg - Growth Banking and PSU Fund 90.81% 0.95 8.77 1.76 3.67 5.62 6.01 8.20
UTI Short Term Income Fund - Reg - Growth Short Duration Fund 86.24% 1.24 8.99 1.43 3.33 5.07 5.37 7.26
NIFTY Short Duration Debt Index -- -- -- 1.88 3.80 5.67 6.25 7.21
ICRA Composite Bond Fund Index -- -- -- 3.03 4.73 4.10 4.38 7.80
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48
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