hdfc short term debt fund give a boost to your income with ... · • high real yields* in india...
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HDFC Short Term Debt Fund(An open ended short term debt scheme investing in instruments such that the Macaulay Duration^ of
the portfolio is between 1 year and 3 years)
November 2019
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This product is suitable for investors who are seeking*:• Income over short term• To generate income/capital appreciation through investments in debt and
money market instruments
Riskometer
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
^Please refer to Slide 7 on which the concept of Macaulay’s Duration has been explained.
Give a boost to your income with lower volatility!
• Conflicting forces lead to a mixed outlook on interest rates
• Liquidity concerns remain for few NBFCs, outlook is mixed; cautious approach needs to
be maintained
• In view of the above, HDFC Short Term Debt Fund offers :
Controlled duration
Focus on yields
Focus on Quality
Stocks/Sectors referred above are illustrative and not recommended by HDFC Mutual Fund / AMC. The current
investment strategies are subject to change depending on market conditions.
Current Fixed Income environment
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Interest Rates Outlook – Likely to remain Range bound
Positives
• Domestic growth softness higher than anticipated
• Global growth outlook remains muted
• Scope of further rate cuts; Accommodative stance
to remain till “it is necessary to revive growth”
• High real yields* in India
• Healthy real yields* differential between India & US
• Attractive term premium over repo rate
Negatives
• Excess SLR securities holding by PSU banks
• Risk of fiscal slippage remains high
• Ample liquidity may result in lower OMO purchases
• Food prices may keep near term inflation over 4%
• Risk of full fledged trade war receding
Yields likely to be range bound with downward bias
3
* Month-end 10Y benchmark yield less headline inflation for the month
Interest Rates Outlook:Forces favouring lower Interest rates
Real Yields = Month-end 10Y GSec Yield and CPI; Updated till 31stOct’19. CPI-
IW is used to calculate real yields for period before 2012
Source: CMIE, Bloomberg, RBI, Kotak Institutional research, Morgan Stanley
Data beyond Oct 2019 are Kotak Institutional Equities estimates
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• Domestic growth outlook has deteriorated
significantly over past 6 months
• Growth forecast may be revised down further
• Global growth outlook also remains muted
• Headline inflation to hover around 4%-5%
• Recent surge is due to rise in vegetable
prices; reversal in the same may result in
inflation below 4%
• Core inflation moderates
• Real yields* in India high, albeit off its peak
• Healthy differential with US Real yields
3.4
3.83.7
2.93.0
2.0
2.5
3.0
3.5
4.0
2016 2017 2018 2019E 2020E
YOY, %Global Growth slowing
0.0
2.0
4.0
6.0
8.0
Oct/15 Oct/16 Oct/17 Oct/18 Oct/19 Oct/20
%
Inflation outlook remains benign
8.2%
7.2%
6.8%
7.1%
7.4%
6.2%
6.8%
5%
6%
7%
8%
9%
FY17 FY18 FY19 FY20E FY21E
GDP growth revised down
GDP Growth Jun19 Forecast Oct19 Forecast
Interest Rates Outlook: Forces adversely impacting interest rate
Source: RBI, Kotak Institutional research, NSDL.
* Adj SLR = Investments in Statutory Liquidity Ratio (SLR) Securities adjusted for securities under LAF
# Regulatory Requirements = SLR + Liquidity coverage requirement requirements (~15-17% of NDTL) –
carve out allowed from SLR
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• Excess SLR Investments, especially with PSU banks
• Incremental demand for G-sec could remain muted
• Fiscal slippage imminent with corporate tax rate cuts
• Fiscal impact of tax rate cuts is estimated to be
~0.3% of GDP for centre and ~0.2% for states
• Given the weak demand, additional supply of dated
G-Secs poses risk to yield
• Ample liquidity may lead to lower OMO purchases by RBI
3.5%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Se
p/0
7
Se
p/0
8
Se
p/0
9
Se
p/1
0
Se
p/1
1
Se
p/1
2
Se
p/1
3
Se
p/1
4
Se
p/1
5
Se
p/1
6
Se
p/1
7
Se
p/1
8
Se
p/1
9
TTM Fiscal deficit as % of GDP
-2,500.0
-1,500.0
-500.0
500.0
1,500.0
2,500.0
3,500.0
Jun/1
8
Jul/18
Aug/1
8
Sep/1
8
Oct
/18
Nov/1
8
Dec/
18
Jan/1
9
Feb/1
9
Mar/
19
Apr/
19
May/1
9
Jun/1
9
Jul/19
Aug/1
9
Sep/1
9
Oct
/19
INR bnInterbanking Liquidity
28.2%
18.6%
17.0%
22.0%
27.0%
32.0%
Oct
/15
Jan/1
6
Apr/
16
Jul/16
Oct
/16
Jan/1
7
Apr/
17
Jul/17
Oct
/17
Jan/1
8
Apr/
18
Jul/18
Oct
/18
Jan/1
9
Apr/
19
Jul/19
Oct
/19
Excess SLR holdings with PSU Banks
Adj SLR*
Regulatory Requirement #
INR bn FY19 FYTD20
Forex Purchases / (Sales) (USD 15.4 bn) USD 11.4 bn (Upto Sep)
OMO purchases / (Sales) ~ INR 3,000 bn INR 526 bn (Upto Oct)
• Liquidity concerns post IL&FS default remain despite
actions by RBI and Government, especially for select NBFCs
• Securitisation / asset sale, unutilised bank lines etc.
supporting the liquidity
• Growth expected to moderate for NBFCs
• Cost of funds rising with widening of spreads
• Risk aversion amongst lenders
• Concern over NBFCs / HFCs with higher yielding real estate
exposures.
• Along with widening of spreads for NBFCs, Non AAA
corporate bond spreads have also widened
• Non-AAA corporate bonds trading at attractive valuations
• Corporate bond spreads have narrowed recently
In our opinion, cautious approach towards credit needs to be maintained
Liquidity concerns remain for select NBFCs, outlook is mixed
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* AAA average spread is average spread of 3 Yr. bond yields for 6 select large AAA rated NBFCs over 3 Yr benchmark Gsec. AA average spread is average spread of 3 Yr.
bond yields for 6 select large AA rated NBFCs over 3 Yr benchmark Gsec .
^ Average monthly spread of 3 Year corporate bond yields over 3 Yr benchmark Gsec yields.
Source: Daily valuation provided by ICRA/CRISIL; Bloomberg; Data is updated till 13th November 2019. Refer disclaimer
In view of the individual circumstances and risk profile, each investor is advised to consult his / her professional advisor before making a decision toinvest.
Positioning: Debt Funds
Liquid Funds
Ultra Short
Term Funds
Money
Market
Funds
Low
Duration
Funds
Short
Duration
Funds
Medium
Duration
Funds
Long
Duration
Funds
RISK (Maturity)
RE
TU
RN
Upto 91
days$
3 -6
months^
Upto 1
year$
6 -12
months^
1-3 years^ 3-4 years^
(1-4 years in
adverse
situation)
4-7 years^
(1-7 years in
adverse
situation)
$ - Maximum
maturity of a
security
^ - Portfolio
Macaulay
Duration
Macaulay Duration (Duration) measures the price volatility of fixed income securities. It is often used in the comparison of interest rate risk betweensecurities with different coupons and different maturities. It is defined as the weighted average time to cash flows of a bond where the weights arenothing but the present value of the cash flows themselves. It is expressed in years. The duration of a fixed income security is always shorter than its termto maturity, except in the case of zero coupon securities where they are the same.
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HDFC Short Term Fund : Portfolio Positioning
8
• Portfolio is focused on generating returns through interest accruals by building a
relatively higher quality credit portfolio with a shorter maturity profile.
• Fund seeks to maintain the Macaulay duration of the Portfolio around 1-3 years.
The current investment strategy is subject to change depending on the market conditions. For complete portfolio details refer www.hdfcfund.com. HDFC MutualFund/AMC is not guaranteeing/offering/communicating any indicative yields or guaranteed returns on investments made in the scheme. The product positioningand intended duration is based on current view and is subject to change.
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Source: MFI Explorer, AAA includes Sovereign, Cash, Cash Equivalents , A1+ and Net Current AssetsPortfolio Details for Last 5 years.
HDFC Short Term Debt Fund : High Quality Portfolio with range bound maturity
60
65
70
75
80
85
90
95
100
Oct
-14
Jan-1
5
Apr-
15
Jul-15
Oct
-15
Jan-1
6
Apr-
16
Jul-16
Oct
-16
Jan-1
7
Apr-
17
Jul-17
Oct
-17
Jan-1
8
Apr-
18
Jul-18
Oct
-18
Jan-1
9
Apr-
19
Jul-19
Oct
-19
Allocation to AAA & Equivalent Securties
1
1.5
2
2.5
3
Oct
-14
Jan-1
5
Apr-
15
Jul-15
Oct
-15
Jan-1
6
Apr-
16
Jul-16
Oct
-16
Jan-1
7
Apr-
17
Jul-17
Oct
-17
Jan-1
8
Apr-
18
Jul-18
Oct
-18
Jan-1
9
Apr-
19
Jul-19
Oct
-19
Average Maturity
Analysis of Distribution of Returns since inception
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Annual Rolling Returns
Annual Rolling - Since inception, the fund has given 6% or higher returns 93.2% of the times.
3 Year Rolling Returns
3 year Rolling - Since inception, the fund has given more than 7.5% returns – 95.11% of the times.
1 year and 3 year Rolling returns are calculated since inception of the fund based on daily frequency. For Detailed performance refer Slide no 14-15. Past performance may or may not be sustained in the future. HDFC Mutual Fund/AMC is not guaranteeing/offering/communicating any indicative yields or guaranteeing returns on investments made in the scheme. Inception date: June 25, 2010 . Data is Upto October 31, 2019.
Annual Returns (%) % of times
More than 4% 100%
Less than 6% 6.76%
6% to 7.5% 11.98%
7.5% to 9% 34.41%
More than 9% 46.84%
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
Jun
-11
No
v-1
1
May
-12
Oct
-12
Mar
-13
Au
g-1
3
Feb
-14
Jul-
14
Dec
-14
Jun
-15
No
v-1
5
Ap
r-1
6
Sep
-16
Mar
-17
Au
g-1
7
Jan
-18
Jun
-18
Dec
-18
May
-19
Oct
-19
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
Jun
-13
Oct
-13
Jan
-14
May
-14
Sep
-14
Dec
-14
Ap
r-1
5
Jul-
15
No
v-1
5
Mar
-16
Jun
-16
Oct
-16
Jan
-17
May
-17
Sep
-17
Dec
-17
Ap
r-1
8
Au
g-1
8
No
v-1
8
Mar
-19
Jun
-19
Oct
-19
Annual Returns (%) % of times
More than 4% 100%
Less than 6% 0.07%
6% to 7.5% 4.82%
7.5% to 9% 39.44%
More than 9% 55.67%
Short Term Funds are suitable for investors:
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Desiring to take exposure in a relatively higher quality credit portfolio with a
shorter maturity profile.
Having an investment horizon of 6-12 months.
With a need to park short term surpluses.
Using it as a channel to transfer funds systematically to other schemes.
Portfolio Statistics
Portfolio Classification
by rating class
% of Net Assets
Sovereign 1.6
AAA/AAA(SO)/A1+/A1+(SO) &
Equivalent83.1
AA+/AA/AA- 7.6
A+ & Below 0.1
Cash, Cash Equivalents and Net
Current Assets7.6
Average Maturity Modified Duration Yield To Maturity
2.72 years 2.24 years 7.01%
Portfolio Classification
by asset class
% of Net Assets
G-Sec, SDL 1.6
Credit Exposure 90.8
Cash, Cash Equivalents and Net
Current Assets7.6
For complete portfolio details refer www.hdfcfund.com. Portfolio details provided as on October 31, 2019.
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Fund Facts
13
Nature of SchemeAn open ended short term debt scheme investing in instruments such that the
Macaulay Duration^ of the portfolio is between 1 year and 3 years
Category of Scheme Short Duration Fund
Inception Date
(Proposed Date of
allotment)
25th
June, 2010
Investment Objective
To generate income/ capital appreciation through investment in debt and money market
instruments. There is no assurance that the investment objective of the Scheme will be realized.
Fund Manager $ Anil Bamboli
Investment Plan Regular Plan & Direct Plan
Investment Options
Options under each plan: Growth and Dividend. Dividend Option offers Daily (Reinvestment), Weekly
(Payout and Reinvestment) and Monthly (Payout and Reinvestment) facility.
Minimum Application
Amount. (Under Each
Plan/Option)
Purchase: Rs. 5,000 and any amount thereafter
Additional Purchase: Rs. 1,000 and any amount thereafter
Benchmark CRISIL Short Term Bond Fund Index
$ excluding Overseas investments, if any. Fund Manager for overseas investments: Mr. Chirag Dagli (since July 22, 2019)
Scheme Performance Summary
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Value of Rs 10,000 invested
Scheme Returns (%)
Benchmark Returns (%)
#
Additional Benchmark Returns (%)
## $
Scheme (Rs)
Benchmark (Rs)#
Additional Benchmark
(Rs)##
Last 1 year 10.57 11.08 8.36 11,057 11,108 10,836
Last 3 years 7.81 7.65 6.79 12,537 12,483 12,183
Last 5 years 8.32 8.34 7.27 14,912 14,931 14,207
Since inception – June25, 2010
8.72 8.31 6.98 21,868 21,107 18,795
Past performance may or may not be sustained in futureReturns greater than 1 year are compounded annualized (CAGR). The above scheme has been managed by Anil Bamboli since June 25, 2010.The above returns are of Regular Plan - Growth Option. #CRISIL Short Term Bond Fund Index. ##CRISIL 1 Year T-Bill Index. Different plans viz. Regular Plan andDirect Plan have a different expense structure. The expenses of the Direct Plan under the Scheme will be lower to the extent of the distribution expenses /commission charged in the Regular Plan. Returns as on 31st October, 2019.
15
Performance of other schemes managed by the Fund manager (Top 3 & Bottom 3)
Scheme Managing scheme since
1 year3 year 5 year
CAGR (in %) CAGR (in %)
Anil Bamboli manages 35 other schemes in existence for more than 1 year
Performance of Top 3 schemes managed by Anil Bamboli
HDFC FMP 1218D December 2016 Jan 12, 17 10.18 NA NA
CRISIL Composite Bond Fund Index # 13.55 NA NA
HDFC FMP 1302D September 2016 Sept 28, 16 8.89 8.14 NA
CRISIL Composite Bond Fund Index # 13.55 7.38 NA
HDFC FMP 1199D January 2017 Jan 31, 17 9.90 NA NA
CRISIL Composite Bond Fund Index # 13.55 NA NA
Performance of Bottom 3 schemes managed by Anil Bamboli
HDFC DAF - III - 1224D November 2016 Sept 12, 16 8.31 NA NA
NIFTY 50 Hybrid Short Duration Debt 25:75 Index #$
11.99 NA NA
HDFC DAF - III - 1267D October 2016 Oct 25, 16 8.32 5.79 NA
NIFTY 50 Hybrid Short Duration Debt 40:60 Index #$
12.83 9.79 NA
HDFC FMP 1146D April 2018 May 10, 18 6.57 NA NA
CRISIL Composite Bond Fund Index # 13.55 NA NA
Past performance may or may not be sustained in the future. The above returns are of Regular Plan – Growth Option. Load is not taken into consideration for computation ofperformance. On account of difference in the type of the Scheme, asset allocation, investment strategy, inception dates, the performance of these schemes is strictly not comparable.Performance of close-ended schemes is not strictly comparable with that of open-ended schemes since the investment strategy for close-ended schemes is primarily buy-and-holdwhereas open-ended schemes are actively managed. Top 3 and bottom 3 schemes managed by the Fund Manager have been derived on the basis of returns since inception vis-à-visthe benchmark. In case the benchmark is not available on the Scheme’s inception date, the returns for the concerned scheme is considered from the date the benchmark is available.Returns as on 31st October, 2019. Different plans viz. Regular Plan and Direct Plan have a different expense structure. The expenses of the Direct Plan under the Scheme will be lowerto the extent of the distribution expenses/ commission charged in the Regular Plan. NA – Not Available. # Benchmark of the Scheme. $The scheme is co-managed by Mr. KrishanKumar Daga & Anil Bamboli.
Disclaimer
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This presentation dated 29th
November, 2019 has been prepared by HDFC Asset Management Company
Limited (HDFC AMC) based on internal data, publicly available information and other sources believed to be
reliable. Any calculations made are approximations, meant as guidelines only, which you must confirm before
relying on them. The information contained in this document is for general purposes only. The document is
given in summary form and does not purport to be complete. The document does not have regard to specific
investment objectives, financial situation and the particular needs of any specific person who may receive this
document. The information/ data herein alone are not sufficient and should not be used for the development
or implementation of an investment strategy. The statements contained herein are based on our current views
and involve known and unknown risks and uncertainties that could cause actual results, performance or
events to differ materially from those expressed or implied in such statements. Past performance may or may
not be sustained in future. Neither HDFC AMC and HDFC Mutual Fund nor any person connected with them,
accepts any liability arising from the use of this document. The recipient(s) before acting on any information
herein should make his/her/their own investigation and seek appropriate professional advice and shall alone
be fully responsible / liable for any decision taken on the basis of information contained herein.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
Thank You
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