investment advisory group presentation march 2019 · valuation differential between large cap and...
TRANSCRIPT
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1
Investment Advisory Group
Presentation
March 2019
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2
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 The Indian equity markets have remained range bound so far in CY2019. The downside to the markets emanated from weak
quarterly results and geopolitcal issues; while the upside to the markets was on the back of lower interest rates and strong
FII inflows.
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.
Strong USD, increasing global interest rates, trade wars and upcoming general elections could cause volatility in the equity
markets.
Macro indicators continue to look positive like lower inflation, improved domestic liquidity conditions, indications of steady
volume growth continuing in many businesses, as is being witnessed in the strong revenue growth of corporates in Q3FY19
results. However, lower corporate margins needs to reverse for stronger earnings growth to emerge.
The GDP data for Q3FY19 showed weakness but improving capex trends suggest CY19 could be marked by improving
investment demand from corporates. The consumption friendly interim budget is also likely to help improve revenue
growth.
While most factors look positive, events like the general elections and trade wars can have major sentimental impact on the
markets which can give rise to sharp volatility in the near term
From an Equity Mutual Fund perspective, investors should look at Large cap Fund for fresh investments and SIP into
Midcap and Small caps stocks/funds can begin with a longer horizon. Considering the event heavy period, for the Equity
investment strategy, we are recommending 30% Lumpsum and rest 70% staggered over the next 4 months. Investors could
also use options like Daily SIP/Monthly SIP for investing.
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3
Debt Mutual Fund Strategy
Investments into Short Duration 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 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).
Investors who are comfortable with intermittently volatility, can also look at
strategies that focus at the longer end of the yield curve. i.e. High duration
funds, with a horizon of 24 months and above.
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Research Presentation – Contents
US economic data continues to remain steady… while US Fed sounds dovish
China‟s economic data points continues to remain weak…Positive outcome of US-China trade deal to boost sentiments
Crude prices have inched up in the last two months…current levels unlikely to impact India‟s fiscal math given the budget estimate of subsidy
India continued to witness steady economic data like stable rupee, high credit growth and strong PMI…while weakness seen in certain data points
India‟s GDP continued to slow down in Q3FY19 GDP at 6.6% YoY lower than expectations…rising GFCF continues to remain a bright part
Improvement in capacity utilization and GFCF indicating revival in investment activity…while consumption demand seeing some hiccups
With inflation continuing with its downward journey and growth slowing down…RBI may look for another rate cut
Government continues to focus on reforms and improved execution
Q3FY19 results were mixed…Revenue growth continued to improve while margins were weak
Despite weak earnings and geo political tension, valuations remained at high…earnings growth is needed for improvement in valuation
Key global events and geo-political scenario are likely to direct markets in CY19
Key concerns to watch out
Valuation differential between Large Cap and Midcap Indices have corrected.
Nifty 50 rolling returns for last 15 years
Equity Market Round Up – February 2019
Equity Market Outlook and stocks
Fixed Income
G-sec yields turned volatile in event heavy February 2019…
RBI‟s Sixth Bi-monthly Monetary Policy…A surprise rate cut along with change in stance
Global Monetary Policies…and macro-economic developments
CPI inflation declined sharply in January 2019…Core CPI inflation remained elevated
Growth Slowdown and lower inflation – may push RBI to stimulate…to be positive for bonds
Fiscal deficit touches 121.5% of full-year target in January
G-sec Supply Pressure in FY20
Commodity Prices rise need to be tracked…especially crude oil prices
system liquidity deficit declined…helped by continuous OMOs purchases by RBI
Short term rates declined tracking liquidity support by RBI…
The G-sec yield curve steepened further in February…
Fixed Income Outlook
Equity Mutual Funds
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5
US economic data continues to remain steady…
…while US Fed sounds dovish
US economic data continued to remain steady with employment rising and hourly
wages seeing steady growth.
U.S. hiring activity in Jan‟19 marked the 100 consecutive month of job creation.
Thus, these trends are signaling that job gains continue to remain robust without major
inflation pressures, which would remain a cause of concern for Federal Reserve.
Meanwhile, US GDP grew by 2.6% YoY in Q4CY18 vs 3.4% YoY growth in Q3CY18.
US Manufacturing PMI for February 2019 remained steady at 53.0 vs 54.9 in January
2019.
Given the weaker global economic and financial developments and muted inflation
pressures, the US Fed in its Jan‟19 policy meeting announced that it will remain patient
on adjustments to the target range for the federal funds rate.
The Fed said that the additional data would help policymakers gauge the trajectory of
business and consumer sentiment as the minutes said that a patient posture would
also allow time for a clearer picture of the international trade policy situation and the
state of the global economy to emerge.
Also on reducing the size of its balance sheet, minutes of the Jan‟19 US Fed meeting
showed that officials discussed a plan to end the reduction of bonds on the Fed's
balance sheet before the end of CY19. This could be a big positive for markets
The recent announcement by US Fed indicating a dovish tone along with plans to
reconsider further normalization of its balance sheet size lower have boosted the
global risk-on sentiments. Going ahead, normalization of key economic data, US Fed
policy actions and US – China trade talks are likely to drive the sentiments in the US
and global markets.
260028003000320034003600380040004200440046004800
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-18
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-19
(USD
in B
n.)
US Fed Balance Sheet
Source: US Federal Reserve
Source: IHS Markit
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6
The on going tariff war between US and China has resulted in continued weakness in
economic data for the Chinese economy.
China‟s GDP grew by 6.6% YoY in CY18, the slowest growth rate since 1990, amid a
bitter trade dispute with the US. Additionally, Q4CY18 GDP growth declined further to
6.4% YoY vs 6.5% YoY in Q3CY18, the slowest pace since 2009.
Also, China's Manufacturing PMI continued in contraction territory for the third
consecutive month in a row, coming in at 49.9 in Feb’19 vs 48.3 in Jan’19.
However, China‟s Jan‟19 exports grew by 9.1% YoY vs a fall of 4.4% YoY in Dec‟18.
But China‟s exports to US continued to decline in the month of Jan‟19 as well, as it
declined by 2.4% YoY vs 3.5% YoY decline seen in Dec‟18. Thus, the China's closely
watched trade surplus with the US fell to USD 27.3 bn in Jan’19 from USD 29.87 bn
in Dec’18.
On the positive side, US President Donald Trump recently said that an agreement could
be reached with China as "substantial progress" had been made on negotiations.
Trump also announced that he would postpone a scheduled March 2, 2019
increase in tariffs on USD 200 bn of Chinese imports (on the basis of CY17 import
data), from 10% to 25%.
However, in the recent testimony, U.S. Trade Representative Robert Lighthizer said that
U.S.-China trade agreement is far from completion and will require much more work,
particularly on enforcement.
Moreover, giving out the details, Lighthizer added that administration is pushing for
structural changes in China, including an end to cyber theft of US commercial secrets,
limits on state support for Chinese companies and an end to the forced transfer of
technology from US companies as a condition of accessing China's markets.
Thus, given the weakness seen in the Chinese economy over the last few months,
positive outcome of the US-China trade negotiations would hold a key and is likely
to be a key event to watch out for in the near term.
China’s economic data points continues to remain weak…
…Positive outcome of US-China trade deal to boost sentiments
Source: Media Reports
Source: Media Reports
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7
Crude prices have inched up in the last two months… current levels unlikely
to impact India’s fiscal math given the budget estimate of subsidy
Brent crude oil prices after reaching low of ~USD 49 per bbl in December
2018, have recently moved up by ~23% in last two months of Jan-Feb
2019, mainly on the back of supply cuts by OPEC starting Jan‟19 and
concerns of US sanctions on Venezuela Energy sector.
Going ahead, US announcement on waiver post the 180 days waiver
window given to eight countries including India, China and Japan is likely
to be an important event to watch.
For India, the higher budgetary allocation for 2019-20 Petroleum Subsidy
(up by ~51% YoY) is likely to keep the impact of Under recovery
payments in check.
The recent up move in crude oil prices is unlikely to affect India‟s Fiscal
math given the higher budgetary allocation for Petroleum Subsidy in
Interim Budget 2019-20. However any further upward movement in the oil
prices and also depreciation of rupee may impact the fiscal deficit and its
impact would be a key monitorable for domestic markets.
Going ahead, 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 are likely to direct the
crude prices in the near to medium term.
45
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90
Feb-
18Fe
b-18
Feb-
18M
ar-1
8M
ar-1
8M
ar-1
8A
pr-1
8A
pr-1
8A
pr-1
8M
ay-1
8M
ay-1
8M
ay-1
8Ju
n-18
Jun-
18Ju
n-18
Jul-1
8Ju
l-18
Jul-1
8Ju
l-18
Aug
-18
Aug
-18
Aug
-18
Sep-
18Se
p-18
Sep-
18O
ct-1
8O
ct-1
8O
ct-1
8N
ov-1
8N
ov-1
8N
ov-1
8D
ec-1
8D
ec-1
8D
ec-1
8Ja
n-19
Jan-
19Ja
n-19
Feb-
19Fe
b-19
Feb-
19
USD
/bbl
Brent Crude prices have inched up in the last two months
Source: Bloomberg
Per unit
impact
(Rs/lit./cyl.)
Annualised
financial impact
(Rs. Bn)
Per unit
impact
(Rs/lit./cyl.)
Annualised
financial
impact (Rs. Bn)
PDS SKO 0.44 1.9 0.45 1.9
Domestic LPG 10.12 13.6 6.16 8.2
Total 15.5 10.1
Source: PPAC Jan 2019 report, Rs/Litre for PDS SKO and Rs./Cyl. For Domestic LPG
Impact of change in product
price by USD 1per bbl / $10per
MT
Product
Impact of change in
exchange rate by Rs.1/$
Impact of changes in product price by USD 1 per bbl for PDS SKO and USD
10/MT for Domestic LPG & change in exchange rate by Rs.1 per USD
Particulars (Rs Bn) FY16 FY17 FY18 H1FY19 FY20BE
Under Recovery on Petrol 0 0 0 0
Under Recovery on Diesel 0 0 0 0
Under Recovery on Domestic LPG (Subsidised)^ 0.18 0 0 0
DBTL Subsidy on Domestic LPG (Subsidised)^ 160.56 121.33 209.56 139.58
PMUY Subsidy on Domestic LPG (Subsidised)^ 0 29.99 24.96 30.62
DBTK Subsidy on PDS Kerosene 0 0.11 1.13 0.26
Under Recovery on PDS Kerosene 114.96 75.95 46.72 33.09
Total Subsidy/Under Recovery 275.71 227.38 282.37 203.55
Budgetary Allocation (Full Year) 299.99 275.38 244.60 248.33 374.78
Growth in Budgetary Support for Petroleum Subsidy -8.2% -11.2% 1.5% 50.9%
Source: Ministry of Petroleum and Natural Gas, Budget Documents, *For FY19 Budgetary Allocation is
Revised Estimates (RE) and FY20 is Budgary Estimates (BE) and FY16, FY17 and FY18 is actuals.
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8
India continued to witness steady economic data like stable rupee, high
credit growth and strong PMI… while weakness seen in certain data points
While certain Economic data like higher level of Fiscal deficit and Current Account Deficit are concerning and volatility in GST collections are showing some
weakness
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 show improvement –stable rupee, strong PMI data, improving credit growth data and steady growth in Corporate Advance tax collection
Certain macro data like stable rupee along with improving non-food credit growth are signalling improved macro scenario and improvement in
Corporate Advance tax collection by 14.8% YoY in 9MFY19 vs 10.9% YoY growth seen in 9MFY18 and 14 month high Manufacturing PMI in
Feb‟19 is signalling micro level improvement.
While, certain economic data like higher fiscal deficit of 3.4% (Revised Estimates - RE) of GDP for FY19 and similar number expected for
FY20 and rising Current Account deficit and volatile GST collection are indicating weakness in the macro picture.
Going ahead, the recent decline in the oil prices from four year high in the month of Oct’18 and stability of Indian rupee at
~Rs.70-72/USD levels may result in lowering of CAD and Trade Deficit. However, the recent budgetary announcement for
addressing the farm sector stress may put some pressure on the fiscal deficit.
10.9%
14.8%
8%
9%
10%
11%
12%
13%
14%
15%
16%
Corporate Income Tax
Steady Growth in Corporate Advance Tax collection (% YoY)
April-December FY18 April-December FY19Source: Ministry of Finance
3.3%
3.4% 3.4%
3.0%
3.1%
3.2%
3.3%
3.4%
3.5%
3.6%
2018-19 BE 2018-19 RE 2019-20 BE
Fiscal Deficit Estimates
Source: Ministry of Finance, BE: Budget Estimates, RE: Revised Estimates
60
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76
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-18
Fe
b-1
8
Ma
r-1
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Ap
r-1
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Ma
y-1
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g-1
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Se
p-1
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Oct
-18
No
v-1
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De
c-1
8
Jan
-19
Fe
b-1
9
INR
/U
SD
Rupee seen stabilizing at ~70-72/USD levels
Source: Bloomberg
51.2 51.250.3
52.6
54.7
52.4 52.1
51.051.6
51.2
53.152.3
51.752.2
53.154
53.253.9
54.3
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Au
g-1
7
Se
p-1
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Oct-
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No
v-1
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De
c-1
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Jan
-18
Fe
b-1
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Ma
r-1
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Ap
r-1
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Ma
y-1
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Jun
-18
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Au
g-1
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Se
p-1
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No
v-1
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De
c-1
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Jan
-19
Fe
b-1
9
Manufacturing PMI rises to 14 month high in February 2019
Source: Bloomberg
0
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/3/2
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1/3
/20
19
2/3
/20
19
Ch
an
ge
Yo
Y %
Credit growth increasing at a steady pace in last few months (YoY %)
Source: RBI
956941 933
838 843
898
860
922
1035
940956 965
940 944
1007976
947
1025
800
850
900
950
1000
1050
1100
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
8
Ma
y-1
8
Jun
-18
Jul-
18
Au
g-1
8
Se
p-1
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No
v-1
8
De
c-1
8
Jan
-19
Volatile GST revenue collection (Rs. Bn)
Source: Ministry of Finance
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9
India’s GDP continued to slow down in Q3FY19… GDP at 6.6% YoY lower
than expectations… rising GFCF continues to remain a bright part
India’s GDP grew at 6.6% YoY in Q3FY19 and Gross Value Added (GVA) at 6.3% YoY at a
slower pace in last six quarters.
9MFY19 GDP growth stood at 7.2% YoY compared with 6.8% YoY in 9MFY18 and GVA growth
stood at 7.0% YoY compared with 6.6% YoY in 9MFY18.
As per the second advance est, full year GDP is expected to grow at 7.0% YoY and GVA at
6.8% YoY, lower than previous estimate due to downward revision of Q1 and Q2 numbers.
Q3FY19 GVA growth was driven by growth in following sectors;
Mining & quarrying – grew by 1.3% YoY vs contraction of 2.1% YoY in Q2FY19
Construction – grew by 9.6% YoY vs 8.5% YoY in Q2FY19
Financial, Insurance, Real Estate & Professional services – grew by 7.3% YoY vs
7.2% YoY in Q2FY19
However, some of the sectors grew at lower rate as compare to Q2FY19;
Agriculture, Forestry & Fishing – grew by 2.7% YoY vs 4.2% YoY in Q2FY19
Manufacturing – grew by 6.7% YoY vs 6.9% YoY in Q2FY19
Electricity, Gas, Water supply & other Utility Services – grew by 8.2% YoY vs 8.7% YoY
in Q2FY19
Public Admin, Defence & other services – grew by 8.7% YoY vs 7.6 % YoY in Q2FY19
On the expenditure side, Gross Fixed Capital Formation (GFCF) growth, a proxy to investment
demand, continued its steady performance and improve on sequential basis. However, private
consumption and government consumption growth both saw a slowdown during the quarter.
While the rising GFCF, a proxy for private capex, hinting towards continued improvement
in investment demand remains a bright path, slowdown in consumption demand and
government expenditure is a cause of concern.
A cut in interest rate and dovish stance by the RBI and incentives given by the
government in recent interim budget is likely to drive the demand and may take out some
pressure of recent slowdown in consumption demand.
Industry Q1FY19 Q2FY19 Q3FY19
Agriculture, Forestry & Fishing 5.1 4.2 2.7
Mining & quarrying 0.4 (2.1) 1.3
Manufacturing 12.4 6.9 6.7
Electricity, Gas, Water supply & other Utility Services 6.7 8.7 8.2
Construction 9.6 8.5 9.6
Trade, Hotel, Transport, Communication & Services
Related To Broadcasting7.8 6.9 6.9
Financial, Insurance, Real Estate & Professional services 6.6 7.2 7.3
Public administration, defence & other services 7.6 8.7 7.6
GVA at Basic Price 7.8 6.8 6.3
Source: Mospi
Growth (% YoY) in Sectoral GVA at basic prices
7.6
6.86.1 6.0
6.8
7.7 7.78.0
7.06.6
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 Q3FY19
Trend in GDP growth (% YoY)
Source: Ministry of Statistics and Programme Implementation
Expenditures of GDP (% YoY) Q1FY19 Q2FY19 Q3FY19
Private Final Consumption Expenditure 6.9 9.8 8.4
Government Final Consumption Expenditure 6.5 10.8 6.5
Gross Fixed Capital Formation 11.7 10.2 10.6
Change in Stocks 9.5 4.2 3.9
Valuables (25.8) 9.5 13.3
Exports 11.2 13.9 14.6
Less Imports 10.8 21.4 14.7
Discrepancies 22.8 (21.2) (90.6)
GDP at market prices 8.0 7.0 6.6
Source: MoSPI
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10
Improvement in capacity utilization and GFCF indicating revival in investment activity…
…while consumption demand seeing some hiccups
So far consumption demand was one of the key drivers of the economic growth in India. However, off late the overall consumption demand is witnessing
slowdown in growth with PV, Domestic airline traffic data and personal loan growth seeing some hiccups.
The weakness was largely due to the tight liquidity and high base. However, this could be a temporary phenomenon as it may start to improve once again
once liquidity scenario improves significantly. In addition to this, a cut in interest rate by RBI and recent announcement in the interim budget is also
likely to be beneficial for consumption demand.
11.00
12.00
13.00
14.00
15.00
16.00
17.00
18.00
19.00
20.00
21.00
Sep
-14
De
c-1
4
Mar
-15
Jun
-15
Sep
-15
De
c-1
5
Mar
-16
Jun
-16
Sep
-16
De
c-1
6
Mar
-17
Jun
-17
Sep
-17
De
c-1
7
Mar
-18
Jun
-18
Sep
-18
De
c-1
8
% Growth in Personal loan (YoY)
Source: RBI
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Ma
r-1
7
Apr-
17
Ma
y-1
7
Jun-1
7
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
No
v-1
8
De
c-1
8
Jan-1
9
YoY
%
Domestic airline passenger growth data
Source: DGCA
Indian economy is witnessing a steady improvement in investment demand. A lot of lead indicators like capacity utilization, improvement in credit growth,
cement production, improvement in order book for capital goods companies and rising GFCF are indicating that capex cycle is reviving.
While so far capex is being driven by the government, PSU companies and companies in smaller sectors like Chemicals, Paper etc, a large part of corporates are
still away from taking capex decision and are waiting for revival in pricing power for their goods and services. Once these corporates see revival in pricing
power, then it 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
Q3
FY1
6
Q4
FY1
6
Q1
FY1
7
Q2
FY1
7
Q3
FY1
7
Q4
FY1
7
Q1
FY1
8
Q2
FY1
8
Q3
FY1
8
Q4
FY1
8
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
(in
Yo
Y %
)
Trend in GFCF growth
Source: MOSPI
-3.3%
16.6%
1.9%
-5%
0%
5%
10%
15%
20%
Maruti M&M Tata Motors
PV Sales in Feb continues to see muted growth (Change YoY%)
Source: Company
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11
With inflation continuing with its downward journey and growth slowing down,
…RBI may look for another rate cut
India‟s Consumer Price Index (CPI) based inflation for Jan‟19 declined to
a 19 month low and came in at 2.05% YoY compared to 2.19% YoY in
Dec‟18.
CPI inflation also stayed below the RBI‟s medium term inflation target of
4% for the fifth consecutive month. Headline CPI inflation declined mainly
on account of Unusually low food inflation coupled with decline in fuel
prices.
In its Sixth Bi-monthly Monetary Policy 2018-19, RBI reduced the policy
repo rate under the liquidity adjustment facility (LAF) by 25 basis points
from 6.5% to 6.25%.
The RBI also changed its monetary policy stance from „calibrated
tightening‟ to „neutral‟.
Additionally, the RBI revised the CPI inflation projections further
downwards to 2.8% in Q4FY19, 3.2%-3.4% in H1FY20 and 3.9% in
Q3FY20, with risks broadly balanced around the central trajectory.
The RBI was concerned on slowing global growth and faltering
investment activity in the economy that resulted in lowering its GDP
growth forecast for India.
With Inflation firmly under control and GDP growth faltering owing
to weakness in consumption demand, the RBI Monetary policy
committee may look to reduce the rates further to strengthen private
investment activity and buttress private consumption. The interest
rate cut and expectation of further easing, is likely to push up both
consumption and investment activities in the economy.
Source: RBI
Source: RBI
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12
Government continues to focus on reforms and improved execution… The government of India has been consistently working on inclusive development with the help of various reform announcements targeting to improve
both social and physical infrastructure in order to set structural drivers for long term sustainable economic growth. Among all, following were the key
reforms and announcements and their progress during the year:
Goods and Service Tax (GST): Govt. of India implemented one of the biggest tax reforms of the country, Goods and Services Tax (GST) on 1 July, 2017.
The collection under GST in February 2019 stood at Rs.1025 bn vs Rs.947 bn in January 2019. The GST is likely to boost GDP growth in the long term as it is
expected to drive the volume growth for Organized players. Positive for Retail, Consumer Durables, Auto ancillary, home improvement and building
material items like ceramics, tiles, plywood and other sectors with large unorganized share.
IBC: To avoid recurrence and for stringent recovery, the Insolvency and Bankruptcy Code, 2016 (IBC) was enacted to create a Unified Framework for
resolving insolvency and bankruptcy matters. In 2018, over Rs.800 bn was recovered from various corporate debtors, which had defaulted payments,
under the IBC through various insolvency proceeding at the NCLT and the NCLAT (National Company Law Appellate Tribunal), Ministry of Corporate Affair
Secretary Injeti Srinivas told. Positive for Banking sector and Investment led demand.
Pradhan Mantri Awaas Yojana (PMAY) – Gramin is rural housing programme designed to provide affordable household to rural population. A total of
4.45 mn houses have been completed in FY18. Department of Rural Development plans to complete 10 mn houses by FY19 and proposes to complete
29.5 mn by FY22. Recently, central government has announced a new public-private partnership (PPP) policy for affordable housing that allows extending
central assistance of up to Rs.0.25 mn per each house to be built by private builders even on private lands. Pradhan Mantri Awaas Yojana – Urban: The
government plans to construct as many as 11.2 mn houses by FY22 under the scheme. 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 upto H1FY19. Positive for cement, steel and Housing Finance
sectors
Bharatmala and rural roads: Government has approved the Bharatmala project, to accelerate road development with Bharatmala being an umbrella
programme for development of highways. Under the project Bharatmala, government aims to add ~35000 kms of new highways, 9000 kms of economic
corridor, 6000 kms of inter-corridor roads, ~2000 kms of border roads and ~10000 km of the national highway totaling to ~66,100 kms with an total outlay of
Rs.6.92 trillion over the next five years. Positive for cement, steel and road infra sectors.
Direct Benefit Transfer (DBT) Scheme: As per Finance Secretary, the direct benefit transfer in various social sector schemes resulted in savings to the tune
of Rs.1099.83 bn. Currently 439 schemes under 55 Ministries are covered under DBT as against 34 schemes in March 2015. The government plans to bring
a total of 533 central pay-out schemes in 64 ministries under the DBT mechanism. Positive for oil and gas, fertilizer and health care.
National Health Protection Scheme: Government has announced the National Health Protection Scheme (NHPS) in the Union Budget 2018-19 where the
scheme aims to offer health insurance up to Rs.0.5 mn per family per year, covering over 100 mn vulnerable families, benefitting about 500 mn people. Both
secondary and tertiary care hospitalization will be covered. Recently, Prime Minister launched that the scheme across the country from
23 September 2018 and has catered to more than 1.36 mn patients upto 28 Feb 2019. Positive for Insurance sector and Healthcare.
Pradhan Mantri Kisan Samman Nidhi (PM-KISAN): Under PM-KISAN, vulnerable landholding farmer families, having cultivable land upto 2 hectares, will be
provided direct income support at the rate of Rs.6000 per year. Income support will be transferred directly into the bank accounts of beneficiary farmers, in
three equal installments of Rs.2000 each. Around 120 mn small and marginal farmer families are expected to benefit from the scheme. Positive for Agri,
FMCG and other consumption related sectors
______________________________________________________________________
13
The Q3FY19 results saw continued improvement in revenue growth, while profitability got impacted due to inventory losses, impairment of assets
and higher fuel & other costs.
Net sales of 196 companies in CNX 200 index, which have declared results, grew by 19.4% YoY and the EBITDA grew by 8.1% YoY. However,
Reported PAT fell by 27.0% YoY during the quarter due to a onetime impairment charge in an automobile company, higher raw material cost in
overall Automobile sector, higher inventory losses in Oil & Gas companies and due to higher base of other income in Q3FY18 for some companies.
The volume growth for majority of FMCG companies were steady while Automobile companies saw slowdown in sales owing to weak festive
demand due to liquidity issues and changes related to insurance. Capital Goods and Infrastructure companies witnessed improvement in revenue
growth owing to healthy order book and infrastructure push by the government.
Many companies have highlighted that some improvement is expected to flow in from next quarter as raw material prices have softened a bit with
stability seen in currency movement.
We believe going ahead consumption demand to see some revival owing to moderation in interest rate and incentives given in interim
budget for consumption demand related sectors. In addition, investment demand is also expected to improve going ahead as a lot of key
indicators like cement production and rising GFCF are showing signs of improvement, which may help in improving corporate earnings.
Q3FY19 results were mixed…
…Revenue growth continued to improve while margins were weak
Q3FY19 Q2FY19 Q3FY18 Q3FY19 Q2FY19 Q3FY18 Q3FY19 Q2FY19 Q3FY18
Air Transport Service 28.1 16.9 23.9 (78.8) (236.1) 102.3 (74.9) (218.2) 56.4
Auto & Auto Anc 7.1 7.0 17.1 (148.3) (11.9) 52.7 (303.5) (26.5) 29.7
BFSI 13.4 11.3 8.8 40.2 11.3 35.9 5.0 (34.8) (5.5)
Capital Goods 22.4 35.4 20.3 53.2 126.9 92.4 60.5 83.8 67.4
Cement & Pdts 14.7 16.0 27.7 2.5 (7.1) 42.5 63.9 (16.7) 13.7
Chem & Fert 15.2 19.9 8.3 2.9 5.1 33.0 (37.8) 10.8 60.9
FMCG & Retail 12.1 7.1 (14.5) 12.9 10.6 33.2 8.0 14.8 21.6
Healthcare 14.4 9.5 3.8 15.2 (6.2) (1.8) 35.0 (10.6) (31.5)
Infrastructure 20.9 18.6 8.9 28.3 8.3 24.2 48.0 7.4 (21.0)
IT 17.2 16.3 5.2 19.1 17.5 16.2 7.8 12.9 7.8
Media & Ent 37.6 70.6 36.6 33.4 56.2 47.0 152.3 (10.8) (7.7)
Metal & Mining 11.6 20.7 21.0 23.0 52.1 41.9 20.1 88.3 47.8
Miscellaneous 11.9 13.3 14.9 1.5 17.5 70.3 4.9 42.3 43.0
Oil & Gas 35.2 48.1 19.3 (16.8) 20.4 58.2 (23.2) 11.1 37.5
Power 15.0 12.6 0.8 11.8 (14.8) 19.7 (8.8) 5.5 (2.7)
Realty 17.3 19.6 2.1 4.2 2.4 549.3 (82.0) 113.7 972.0
Telecomm 19.2 (3.6) (14.9) (21.2) (33.5) (10.4) 985.7 3298.7 (153.1)
Grand Total 19.4 21.4 10.9 8.1 10.1 38.1 (27.0) (3.9) 17.3
Ex BFSI 21.0 24.2 11.5 (10.9) 9.2 39.8 (33.8) 4.9 23.6
Source: Capitaline
Net sales EBITDA Reported PATYoY Changes in %
______________________________________________________________________
14
Q3FY19 witnessed improvement in corporate topline but profitability took a hit due to sharp volatility in
the raw material prices. While investment demand is growing steadily, consumption demand is likely to
get fresh boost post the interest rate cut and incentives announced in interim budget. We believe that
revenue growth has been steady for past couple of quarters and if corporates are able to manage the
cost and earnings should improve over the time.
Meanwhile, major indices were volatile owing to weak corporate earnings and geo-political tension.
However, a strong inflow from the domestic and foreign institutional investor have helped steady liquidity
scenario in market, which kept the valuation at higher levels.
Weak corporate earnings led by huge loss of impairment in one of the Automobile companies led to
downgrade in overall Sensex consensus earnings for FY19 and FY20.
Currently, the S&P BSE Sensex is trading at 25.6x FY19E consensus EPS of Rs.1400 and 21.1x FY20E
consensus EPS of Rs.1700. (S&P BSE Sensex price as on 28.2.2019).
Given the steady improvement seen in investment demand, Investment led sectors could gradually come
in focus as the earnings in this space could see better performance
In long term India is likely to see a steady growth on the back of improvement in Rural economy,
rising government expenditure, revival of private capex 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.
Despite weak earnings and geo political tension, valuations remained at high …
… 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
Fe
b-0
8
Au
g-0
8
Ja
n-0
9
Ju
n-0
9
No
v-0
9
Ma
y-1
0
Oct-
10
Ma
r-1
1
Au
g-1
1
Fe
b-1
2
Ju
l-1
2
De
c-1
2
Ju
n-1
3
No
v-1
3
Ap
r-1
4
Se
p-1
4
Ma
r-1
5
Au
g-1
5
Ja
n-1
6
Ju
n-1
6
De
c-1
6
Ma
y-1
7
Oct-
17
Ma
r-1
8
Se
p-1
8
Fe
b-1
9
S&P BSE Sensex & Trailing P/E
S&P BSE Sensex (LHS) P/E (RHS)Source: Capitaline
0
50
100
150
200
250
Jan
-18
Feb
-18
Mar
-18
Ap
r-18
May
-18
Jun
-18
Jul-
18
Au
g-18
Sep
-18
Oct
-18
No
v-18
Dec
-18
Jan
-19
Feb
-19
Trend in Domestic Institutional Investors flow (Rs in Bn)
Source: SEBI, Data as on 31 December 2018
-400
-300
-200
-100
0
100
200
Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19
Foreign Portfolio Investment flow trend (Rs in Bn)
FPI - Equity
Source: NSDL, Data as on 31 December 2018
1385 1360
15401400
1700
0
200
400
600
800
1000
1200
1400
1600
1800
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
10
4.9
73
.3
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
Feb
-19
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
______________________________________________________________________
15
Key global events and geo-political scenario are likely to direct markets
in CY19…
U.S. President Donald Trump’s policy actions/announcement on trade policies with possible announcement
on the tariff rate on balance USD 200 bn worth of Chinese imports are likely to keep markets in jittery.
U.S. President Donald Trump‟s ability to pass the bills in the parliament post the win of Democrats in House of
Representative in the mid term elections are also likely to impact the sentiments.
President Trump in December 2018 announced the decision to pull out troops from Afghanistan and Syria,
which may again lead to some security related threats for U.S. and the World from these regions once U.S. military
troops start withdrawing from these regions.
In Euro area, Brexit discussions between Euro area and United Kingdom and discussions on the post withdrawal
trade arrangement with European Union and the World are likely to direct political conditions in Euro area and
world. The United Kingdom‟s scheduled exit from the European Union on March 29, 2019.
Also, political event unfolding in Italy would be a key monitorable for global economy. Additionally, the fragility of
Italy‟s banking sector will remain the biggest risk to Eurozone stability.
The European Central Bank will implement its shift toward monetary tightening slowly and cautiously as the
Italian risk hangs over the eurozone and this is likely to be key monitorable for economic expansion in Euro area.
Further slowdown of Chinese economy is likely to have repercussion on other emerging markets like South
Korea, Taiwan, Thailand, Brazil, Vietnam, Indonesia and India amongst others who are trading partners of China.
______________________________________________________________________
16
Key concerns to watch out ….
Domestic factors ….geo-political tensions, elections, currency movement, liquidity situation and demand
momentum
Escalation in geo political tension between India and Pakistan may lead to sharp volatility
Outcome of general election would be one of the key monitorable for markets in CY19.
If Rupee continue to depreciates (~2% till Feb‟19) in CY19, then it may impact the country‟s twin deficit.
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.
______________________________________________________________________
17
Valuation differential between Large Cap and Midcap Indices have
corrected.
0.0
10.0
20.0
30.0
40.0
50.0Ja
n-0
8
Jun
-08
Oct
-08
Feb
-09
Jul-
09
No
v-0
9
Mar
-10
Jul-
10
Dec
-10
Ap
r-1
1
Au
g-1
1
Dec
-11
May
-12
Sep
-12
Jan
-13
Jun
-13
Oct
-13
Feb
-14
Jun
-14
No
v-1
4
Mar
-15
Jul-
15
No
v-1
5
Ap
r-1
6
Au
g-1
6
Dec
-16
May
-17
Sep
-17
Jan
-18
May
-18
Oct
-18
Feb
-19
Valuation differential between Large Cap and Midcap Indices corrected
Trailing P/E S&P BSE Midcap Trailing P/E S&P BSE Sensex
Source: Capitaline
0.70.7 0.8 0.8
1.0
0.9
1.3 1.3
1.4
1.9
1.2
0.0
0.5
1.0
1.5
2.0
Jan
-08
Jun
-08
Oct
-08
Feb
-09
Jul-
09
No
v-0
9
Mar
-10
Jul-
10
De
c-1
0
Ap
r-1
1
Au
g-1
1
De
c-1
1
May
-12
Sep
-12
Jan
-13
Jun
-13
Oct
-13
Feb
-14
Jun
-14
No
v-1
4
Mar
-15
Jul-
15
No
v-1
5
Ap
r-1
6
Au
g-1
6
De
c-1
6
May
-17
Sep
-17
Jan
-18
May
-18
Oct
-18
Feb
-19
Valuation Premium of Midcap over Sensex
Source: Capitaline
______________________________________________________________________
18
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
120Fe
b-0
5
Feb
-06
Feb
-07
Feb
-08
Feb
-09
Feb
-10
Feb
-11
Feb
-12
Feb
-13
Feb
-14
Feb
-15
Feb
-16
Feb
-17
Feb
-18
Feb
-19
Nifty 50: 1-year rolling return for last 15 years
1 YearSource: ICRA Online
-10
0
10
20
30
40
50
60
70
Feb
-05
Feb
-06
Feb
-07
Feb
-08
Feb
-09
Feb
-10
Feb
-11
Feb
-12
Feb
-13
Feb
-14
Feb
-15
Feb
-16
Feb
-17
Feb
-18
Feb
-19
Nifty 50: 3-year rolling return for last 15 years
3 YearsSource: ICRA Online
-10
0
10
20
30
40
50
Feb
-05
Feb
-06
Feb
-07
Feb
-08
Feb
-09
Feb
-10
Feb
-11
Feb
-12
Feb
-13
Feb
-14
Feb
-15
Feb
-16
Feb
-17
Feb
-18
Feb
-19
Nifty 50: 5-year rolling return for last 15 years
5 YearsSource: ICRA Online
______________________________________________________________________
19
Equity Market Round Up – February 2019
Indices 28 Feb 2019 31 Jan 2019 Chg %
S&P BSE Sensex 35,867 36,257 (1.1)
S&P BSE Mid Cap 14,318 14,560 (1.7)
S&P BSE Small Cap 13,690 13,926 (1.7)
S&P BSE 100 10,989 11,055 (0.6)
S&P BSE 500 14,197 14,285 (0.6)
Net Flow (Rs. Bn) FPI DII
CY19* 130 143
CY18 (340) 1204
CY17 513 1188
CY16 151 475
Source: BSE, NSDL (CY19 FPI data and DII data as on 27 Feb 2019)
Indian equity markets ended on a negative note during the month
as S&P BSE Sensex and Nifty 50 ended with the loss of 1.1%
MoM and 0.4% MoM, respectively.
The S&P BSE Midcap index and the S&P BSE Smallcap index
ended on a negative note with a loss of 1.7% MoM, each.
On the sectoral indices front, the S&P BSE Auto index and S&P
BSE Oil & Gas index were the top two outperformers, as they
rose by 1.7% MoM and 1.4% MoM, respectively. The S&P BSE
Power index and S&P BSE Bankex index were top two
underperformers as they fell by 2.8% MoM and 2.3% MoM,
respectively.
During the month of Feb‟19, FPIs were net buyers to the tune of
~Rs.172 bn and DIIs were net buyers to the tune of ~Rs.74 bn
(Data as of 27 Feb 2019).
20000
23000
26000
29000
32000
35000
38000
41000
Mar
-15
Aug-
15
Jan-
16
May
-16
Oct
-16
Mar
-17
Jul-1
7
Dec-
17
May
-18
Sep-
18
Feb-
19
S&P
BSE
Sens
ex L
evel
s
BSE Sensex Price Earning (PE) 1 year forward
19x
21x
17x
23x
Source: Bloomberg
______________________________________________________________________
20
Equity Market Outlook US economic data continues to remain steady with rising employment and steady Q4CY18 GDP and February 2019 PMI readings. However, given the weaker global
economic and financial developments and muted inflation pressures, the US Fed in its Jan‟19 policy meet has indicated slower interest rate hikes.
The ongoing tariff war between US and China has resulted in weakness in economic data for the Chinese economy. Hence, positive outcome of trade negotiation with
the US holds the key to boost sentiments.
In commodities, while the Brent crude oil prices have inched up in the last two months, the recent up move in crude oil prices is unlikely to affect India‟s Fiscal math
given the higher budgetary allocation for Petroleum Subsidy in Interim Budget 2019-20.
India is also witnessing improvement in some of the key macro data like stable rupee, high credit growth and strong PMI readings, while weakness is seen in certain
data points like volatile GST collection, higher Fiscal Deficit and Current Account Deficit.
India‟s GDP continued to slow down in Q3FY19 as GDP grew by 6.6% YoY which was lower than expectations. However, rising GFCF, a proxy for private capex,
continues to remain a bright part.
Improvement in capacity utilization and GFCF is indicating revival in investment activity, while consumption demand seeing some hiccups due to the tight liquidity and
high base.
In India, with inflation continuing with its downward journey and growth slowing down, RBI may look for another rate cut.
The government of India has been consistently working on inclusive development as Government continues to focus on reforms and improved execution with Pradhan
Mantri Kisan Samman Nidhi (PM-Kisan) being the latest addition to the list of big ticket reforms.
The Q3FY19 results saw continued improvement in revenue growth, while profitability got impacted due to inventory losses and higher fuel & other costs. On the
profitability growth, many companies have highlighted that some improvement is expected to flow in from next quarter as raw material prices have softened a bit with
stability seen in currency movement. Despite weak earnings and geo political tension, valuations remained at high, earnings growth is needed for improvement in
valuation. Currently, the S&P BSE Sensex is trading at 25.6x FY19E consensus EPS of Rs.1400 and 21.1x FY20E consensus EPS of Rs.1700. (S&P BSE Sensex price
as on 28.2.2019). Weak corporate earnings led by huge loss of impairment in one of the Automobile companies led to downgrade in overall Sensex consensus earnings
for FY19 and FY20. However, Given the steady improvement seen in investment demand, Investment led sectors could gradually come in focus as the earnings in this
space could see better performance
In long term India is likely to see a steady growth on the back of improvement in Rural economy, rising government expenditure, revival of private capex 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.
Some of the key global events like Donald Trump‟s policy actions/announcement on trade policies, Brexit and ECB‟s policy stance amongst few other reason would be
key monitorable in CY19. Apart from these key events, certain domestic events like Escalation in geo political tension between India and Pakistan, Outcome of general
election, Rupee movement, corporate credit cycle tightening and Weakening of discretionary consumption demand are the key events to watch out for in the near term.
Given that we have big events like General elections, looming Trade negotiations between large economies, which can have a huge sentimental and fundamental
impact on the markets, we continue to recommend 30% Lumpsum and rest 70% staggered over the next 4 months. Investors could also use options like Daily
SIP/Monthly SIP for investing. 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, Larsen & Toubro, Carborundum Universal, Apar Industries, SBI, ITC, Zydus Wellness, Thyrocare, Phoenix
Mills, M&M, Bajaj Auto, Cyient, PLNG and Reliance could be looked upon from a 2-3 year perspective in line with the individual risk profile.
______________________________________________________________________
21
Recommended Stocks (*CMP as on March 5, 2019)
Bharat Electronics (CMP: Rs.90): 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 Q3FY19 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.
Larsen & Toubro (CMP: Rs.1,307): L&T is India's largest Engineering & Construction Company. L&T delivered good overall growth in Q3FY19 led by execution pick-up in infrastructure, defence and heavy engineering segment on the back of faster execution push for the government projects ahead of elections. While the order inflows declined during Q3FY19, management continued to maintain its 10-12% YoY growth guidance for order inflow for full year FY19. Management is optimistic for FY19 and is confident of achieving the order inflow and revenue growth targets for the fiscal and does not see much impact from the upcoming general elections. L&T is exposed to several levers across business/geographic segments and has emerged as the Engineering & Construction partner of choice in India, which provides a robust foundation to capitalize on the next leg of investment cycle. The management continues to be optimistic about opening up of the defense sector which could be a big opportunity for L&T as it is ready with capacity and expertise to grab such opportunities. Management guided that incremental order inflow growth would be supported by pick up in ordering activity in the Metro and Hydrocarbon segment (specially for Refineries in Middle East region) apart from defence segment. We have a Buy rating on the stock with a target price of Rs.1561, valuing Standalone business at 20x (maintained earlier multiple) FY20E EPS of Rs.50.8 and Subsidiary value of Rs.545/share. Any revision in the target price would depend upon changes in order inflow, execution, profitability in subsidiaries, and rollover to the next financial year, management guidance and general business momentum.
Apar Industries (CMP: Rs.663): Apar Industries has established presence across diverse businesses like Conductors (23% market share), Transformers & Specialty Oils (45% market share), Cables and Auto Lubes. We believe with its diversified product profile, Apar is well positioned to reap the benefits of improvement in the power T&D space in India. The company has delivered a strong performance across all the three segments during Q3FY19 and guided for a similar growth going ahead mainly driven by strong growth in conductor and Speciality oil segments. For the conductor segment, management is optimistic in achieving a much higher value growth given the improving mix in the form of high value copper conductor order from Indian Railways and increasing share of High Efficiency Conductors. Additionally, management continued to remain optimistic on the medium to long term demand for conductors business in domestic market driven by strong capex outlay planned in transmission sector apart from new orders from the railway business. We believe with the completion of major capex programs like conductor plant transition to Jharsuguda, new molten metal rod plant in Lapanga and setting up Oil plant in Hamariyah, company is well placed to benefit from the improvement in sales going ahead. Currently, we have a Buy rating on the stock with price target of Rs.801 which is 15x FY20E EPS (maintaining earlier multiple) of Rs.53.4. Any revision in the stock price would depend upon the change in crude oil price, order inflow, and general business momentum.
State Bank of India (CMP: Rs.276): 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.
Cyient (CMP: Rs.650): Cyient continued to show steady revenue performance across its key business segments. We think that better business pipelines, benefits from acquisitions, cross
selling opportunities and higher client additions could help the company ramp up projects in its existing businesses. The order book for the company at USD 274 mn rose by 11.8% YoY
reflecting the steady business momentum. The management stated that some project got pushed to subsequent quarters which should improve the order book in the near to medium term. The
company is looking to grow revenues by focusing on areas like IoT, Digitization, innovations in Communications, Augmented/Virtual Reality, Defence and Aerospace, which is also likely to drive
earnings in future. The company has a very strong balance sheet with cash balance of Rs.12.3 bn, which would help it to do more buyouts to improve either domain knowledge or to get access
to more clients. We expect the management to be able to deliver steady earnings growth in the medium term. We have a Buy rating on the stock with a price target of Rs.800 at 15x (maintaining
earlier multiple) FY20E EPS of Rs.46.9 (adding Rs.97 of cash per share). Any earnings/target price revision would depend upon the volatility in the organic business, change in the margin profile
and change in general business momentum.
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Recommended Stocks
ITC (CMP: Rs.283): ITC continued to report improvement in volume growth in Cigarette segment for second consecutive quarter. In addition, the company is also witnessing improvement in FMCG business‟
performance with gradual improvement in margins. 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.
Zydus Wellness (CMP: Rs.1,269): Zydus would be looking to consolidate its position in wellness category with the help of iconic brands of Heinz going ahead. Zydus is also expected to benefit from Heinz
distribution reach and customer touch points in long-term. As the EBITDA margin of Heinz business is lower than its existing margin, the margins may get dilute post the deal completion. Also, interest cost is
expected to increase as the deal is partly funded thorough debt. Over the long term, we believe, increasing penetration level, new launches and product extension in existing category coupled with newly
acquired brands would augur well for the company. We are positive on the stock given the structural growth drivers of the health & wellness industry and its strong market share across existing product
category. We are awaiting for more clarity on synergies and other financial details of Heinz post the deal. Hence, we have not incorporated the Heinz number in current assumption and would add the same
once more clarity emerges on the same. Currently, we have a Buy rating on the stock with the target price of Rs.1470 at a target PE multiple of 30x (maintaining earlier PE multiple) on FY20E EPS of Rs.49.0.
Any earning/target price revision would depend on the improvement in performance of key brands, launch of new products, increase in distribution reach, accrual of synergy benefits and performance of
acquired brands from Heinz portfolio, impact of acquisition on balance sheet and return ratios, rollover to next financial year and changes in general business momentum.
Bajaj Auto (CMP: Rs.2,907): Bajaj Auto continued to gain market share in domestic motorcycle business with exports business continuing its improvement journey in 9MFY19. The management expects
overall growth momentum to continue in Q4FY19 driven by higher growth in entry-level segment that is likely to drive market share. Addressing to the concern on margin, the management also guided that the
company expects some improvement in margin in Q4FY19 and larger improvement in FY20. We maintain our long-term positive stance on Bajaj Auto considering its focus on increasing market share in
domestic Motorcycle industry, strong R&D capabilities, robust balance sheet with huge cash and cash equivalent of ~Rs.165 bn (as on Dec‟18) and strong return ratios with ROE of over 20%, ROCE of over
30% and dividend yield of over 2% for past three years. Currently, we have a Buy rating on the stock with the target price of Rs.3278 at 18x (maintaining earlier multiple) FY20E EPS of Rs.175.2 and adding
Rs.125 per share for 48% stake in KTM AG of Austria (at 18x CY17 Bajaj‟s share of EPS of Rs.10 after 30% holding company discount). Any earning/target price revision would depend on the performance of
new launches, improvement in overall EBITDA, rollover to the next financial year and changes in general business momentum.
Phoenix Mills( CMP: Rs.627): PML continued to deliver steady rental growth during Q3FY19 as 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 USD 630 bn in 2015, growing at a CAGR of 16.7% over the same period (Source: PML Annual Report). 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.656): The management expects domestic Tractor industry volume to remain flat in Q4FY19, leading to a reduction in growth guidance for full year to 10% YoY from earlier
guidance of 12-14% YoY for FY19. Further, it expects tractor industry to grow in single digit in FY20 as the industry had witnessed strong double-digit growth in last two-three years. On the Automotive
business, the management highlighted that the new launches are getting good response. The management has reiterated its stance of focusing on building a strong product pipeline in both FES and
Automotive segment by introducing new product/variant of existing vehicle every year and further preparing itself in upcoming electric vehicle space by increasing the capex activity. This may put some pressure
on margins in near term but is expected to improve as the volumes increases and operating efficiency kicks-in. 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 target price of Rs.1037 at 16x (maintaining earlier multiple)
FY20E EPS of Rs.50.3 adding Rs.232 as value 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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Recommended Stocks Thyrocare Tech Ltd (CMP:Rs.540): The performance in Q3FY19 was impacted due to seasonal factors and sharp price reduction. However, the management is hopeful of improvement in coming quarters as
the benefits of price correction to accrue in terms higher volume growth. 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 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.
Reliance Industries (CMP: Rs.1,237): 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. Also, revised IMO regulations on usage of Low Sulphur Fuel Oil (LSFO) from 1
January 2020 is also likely to improve demand for Middle distillates like diesel and thereby likely to benefit complex refinery like to Reliance Industries. 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 currently have a Buy rating on the stock with a target price 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.226): 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. While the Q3FY19 volumes were impacted during the quarter due to poor demand from power sector,
management believes that such loss would be recovered in coming quarters. Moreover, we do not see any meaningful competition for Dahej LNG terminal from upcoming terminals given the 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 Q1FY20 and beyond would result in sharp rise in the earnings for
the company given the improving utilization. Thus we believe improving utilization at Kochi and additional 2.5 MMTPA capacity additions at Dahej terminal is likely to further improve the earnings and profitability
for PLNG. Moreover, international expansion plans given the higher free Cash flow generation capability of the company could also work in favour of the company and this is also likely to improve the growth over
the long term. 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 apart from other international expansion plans announced by the company.
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.
Carborundum Universal (Rs.385): CUMI continues to show sharp improvement in topline across all the three segments (abrasive, ceramic and electro minerals) during Q3FY19. While the operating margins
during the quarter were impacted due to higher input prices and power and fuel cost, we believe given the company‟s market leadership position across most of its segments, it would be able to take the required
price hike in the near term. In abrasives, improved demand from end-user industries, market share gains through shift from unorganized to organized, better pricing power should drive overall growth. In ceramics,
further traction in metz cylinders in which CUMI is a part of a global duopoly along with overall growth for refractories is likely to drive the revenue for the cermic segment. Lastly, in electro minerals, stabilization of
operations post shift of Zirconia facility from South Africa to India, stable revenues in Russia and receding impact of power cost increase going ahead is likely to result in operational improvement for the segment.
With the initial signs of capex recovery visible, we believe CUMI is likely to be the early beneficial of capex cycle revival in the form of improved free cash flow and return ratios led by improved operating leverage.
We have a Buy rating on the stock, valuing the company at Rs.507/share, which is 31x (maintained earlier multiple) FY20 EPS of Rs.16.4. Any earnings/target price revision would depend upon a slowdown in
industrial activities or new capex announcement, market‐share loss to competitors, sharp rise in key raw material prices and adverse currency movement.
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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Fixed Income
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25
G-sec yields turned volatile in event heavy February 2019…
Domestic G-sec yields turned volatile during February 2019 and closed on a negative note tracking domestic as well global events.
G-secs opened the month on a positive note tracking the monetary policy outcome of the US Federal Reserve;
The US Federal Reserve kept the Federal Funds rates unchanged at 2.25%-2.50%, and also said that it would be patient regarding its monetary policy
normalisation going ahead.
However on the negative side, G-sec yields rose, as in the Interim Budget for FY20, while the Fiscal deficit slippage was only minor, which was positive, higher
than expected market borrowings took the market by surprise.
G-sec yields declined tracking the outcome of the Sixth Bi-monthly Monetary Policy for FY19 wherein, the RBI reduced the policy Repo rate by 25 bps from 6.5%
to 6.25%; and also changed the monetary policy stance from „calibrated tightening‟ to „neutral‟.
Lower CPI inflation data for January 2019 also helped the G-Sec yields to decline, fuelling expectations of further interest rate cuts by the RBI in the near term.
Further dovish Minutes of the MPC‟s February 2019 meeting also helped the decline in G-sec yields.
G-sec yields rose again later in the month, tracking rise in crude oil prices, worries on the higher supply of G-secs and rise in geopolitical tensions domestically.
Yield on the old benchmark G-sec 7.17% 2028 bond closed at 7.59% on 28 February 2019 compared to 7.48% on 31 January 2019.
Yield on the new 10 year bond 7.26% G-sec 2029 closed at 7.41% on 28 February 2019 compared to 7.28% on 31 January 2019.
Old Benchmark 7.17% 2028 G-sec
New Benchmark 7.26% 2029 G-sec
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RBI’s Sixth Bi-monthly Monetary Policy… …A surprise rate cut along with change in stance
The RBI reduced the policy repo rate under the liquidity adjustment facility
(LAF) by 25 basis points from 6.5% to 6.25%.
Consequently, the reverse repo rate under the LAF stands adjusted to 6.0%,
and the marginal standing facility (MSF) rate and the Bank Rate to 6.5%.
The MPC also decided to change the monetary policy stance from „calibrated
tightening‟ to „neutral‟.
On the system liquidity, the RBI continued to show its commitment to provide
support. In the press conference, the RBI stated that the liquidity situation is
being monitored regularly and liquidity support would be provided as and when
necessary.
Following were RBI‟s Inflation and Domestic Growth Projections:-
Variables 6th Bi-monthly Monetary Policy 5th Bi-monthly Monetary Policy
Consumer Price Index (CPI) Inflation
• 2.8% in Q4FY19, 3.2%-3.4% in H1FY20 and 3.9% in Q3FY20.
• Risks broadly balanced around the central trajectory.
• 2.7%-3.2% in H2FY19 and 3.8%-4.2% in H1FY20.
• Risks tilted to the upside.
Gross Domestic Product (GDP)
• GDP growth for 2019-20 was projected at 7.4% – in the range of 7.2-7.4% in H1, and 7.5% in Q3.
• Risks evenly balanced
• GDP growth for 2018-19 at 7.4% (7.2-7.3% in H2FY19) and at 7.5% for H1FY20.
• Risks somewhat to the downside
Monetary Policy Stance • Neutral • Calibrated Tightening
The Monetary policy was clearly focused on providing impetus to growth
amidst benign domestic inflation scenario
The MPC also seemed cognizant of the impact, which the possible slowdown
in global growth, could have on domestic economy.
The RBI governor stated that there could be room for further interest rate cuts
depending upon the incoming data.
MPC Members Vote
Dr. Chetan Ghate No
Dr. Pami Dua Yes
Dr. Ravindra H. Dholakia Yes
Dr. Michael Debabrata Patra Yes
Dr. Viral V. Acharya No
Shri Shaktikanta Das Yes
Voting on the Resolution to reduce the policy repo rate by 25 bps to 6.25%
Source:-RBI
Source:-RBI
Source:-RBI
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Global Monetary Policies… …and macro-economic developments
The US Federal Reserve‟s monetary policy meeting
minutes released in February 2019 showed the US Federal
Reserve‟s discussions regarding changing the language in
its statement from "further gradual increases" in rates to
indicating „patience‟ on the monetary policy normalisation.
In the minutes of the European Central Bank (ECB) January
2019 meet released during February 2019, the ECB
acknowledged that the uncertainty regarding the Euro area
growth and inflation outlook has increased recently, thus
increasing the need for stimulus.
Japan
• The manufacturing sector in Japan came into the
contraction zone in February 2019 with a 32-month
low manufacturing PMI score of 48.5, below the 50
mark.
• This was down from 50.3 in January 2019
• The consumer prices in Japan were up by only
0.2% YoY in January 2019.
• Core CPI also was also flat, in line with the
forecasts and down from 0.1% YoY in the previous
month.
Source: U.S. Bureau of Labor Statistics and U.S. Bureau of Economic Analysis (BEA)
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CPI inflation declined sharply in January 2019… …Core CPI inflation remained elevated
Declining for the fourth consecutive month, Consumer Price Index (CPI) based inflation for January 2019 came in at 19 months low.
CPI inflation, for January 2019, came in at 2.05% YoY compared to 2.11% YoY (revised) in December 2018.
CPI inflation stayed below the RBI’s medium term inflation target of 4%, for six months in a row.
Decline in the retail inflation was mainly on account of low food prices, sharp decline in fuel inflation and decline in Core CPI inflation.
While, Core CPI (ex food and fuel) inflation also declined in January 2019 and stood at 5.41% YoY compared to 5.71% YoY in December 2018, it continued to remain above the 5% mark.
CPI food prices, continued to deflate in January 2019, wherein the deflation was at 2.17% YoY compared to a deflation of 2.65% YoY in December 2018.
Decline in the Core CPI inflation was largely broad based, baring segments like ‘Household goods and services’ and ‘Health’, which continued to witness a rise.
Within Core CPI, Inflation in other items like ‘Recreation and amusement’, ‘Education’ and ‘Personal care and effects’, wherein prices had firmed up in December 2018, witnessed a decline in inflation in January 2019.
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Growth Slowdown and lower inflation – may push RBI to stimulate… …to be positive for bonds
India‟s GDP growth for the third quarter of 2018-19 slowed to 6.6% from 7.0% in the second quarter.
The GDP numbers came in lower than market expectation of 6.8%.
Growth numbers for the first and second quarters were also revised down.
The annual estimate for 2018-19 now stands at 7.0% compared to the earlier estimate of 7.2%.
Earlier in the month in the sixth bi-monthly monetary policy the MPC has also highlighted the growth is likely to be impacted on
account of the global trade tensions.
Thus the RBI is likely to resort to monetary easing in the near term to push domestic growth.
The growth-inflation dynamics building up domestically as well as globally indicate easy monetary policies in the near term.
Source: CSO, CEIC and HDFC Bank
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Fiscal deficit touches 121.5% of full-year target in January
India‟s April 18-January 19 fiscal deficit touched Rs.7.7 trillion which is 121.5% of the budgeted target for FY19.
The Government has budgeted a fiscal deficit target of 3.4% of GDP for FY19, revised upwards from 3.3% budgeted earlier.
After rising to Rs. 1 trillion in January 2019, GST collections fell again in February to Rs. 972 bn.
The GST rates for 23 items which were lowered recently, may have led to lower tax collections.
The government has lowered the GST collection target for FY19 to Rs 11.47 trillion as the revised estimates, from earlier estimates of Rs 13.71
trillion.
On the other hand, the RBI has decided to transfer, an interim dividend to the government to the tune of Rs. 280 bn for FY19.
Earlier the RBI had transferred a dividend of Rs.400 bn during the current financial year, which makes the total dividend for FY19 at Rs.680 bn.
In FY18 the RBI had transferred a total dividend of Rs.500 bn to the government.
Government‟s fiscal deficit will be a key monitorable which is one of the factors that influence the domestic bond yields.
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31
G-sec Supply Pressure in FY20
The budgeted market borrowings for FY20, was announced at Rs.7.10 trillion, which was higher than the market expectations.
The gross market borrowing for FY19 were at Rs.5.71 trillion.
The net market borrowings for FY20 were estimated at Rs.4.73 trillion compared to the revised estimates of Rs.4.23 trillion for FY19.
In the current financial year the RBI so far has purchased G-secs through Open Market Operations (OMO) Purchase of G-secs to the tune of Rs.
2.83 trillion.
With the Rs.250 bn OMOs announced for March 2019, the total OMO purchase for FY19 will cross Rs. 3 trillion.
Higher quantum of OMOs in FY19 have been beneficial for the demand-supply dynamics for bond markets.
The bigger question for FY20 is, whether RBI would conduct similar OMO purchases as FY19, given that it is likely to ease monetary policy
through rate cuts.
Source:-GoI
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Commodity Price rise need to be tracked… …especially crude oil prices
Over the last couple of months commodity prices have seen upward an movement.
Crude oil price especially has seen a sharp up move since January 2019.
Prices of industrial metals have also moved up since January 2019.
On a Month on Month basis, Brent crude oil prices moved up by ~8.16% in February 2019 compared to 14.56% in January 2019.
The Bloomberg Industrial Metals Index was up by about 3.44% MoM In February 2019 compared to 7.82% MoM in January 2019.
Movement in commodity prices needs to watched very carefully, as a sustained rise to impact inflation in a negative way.
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system liquidity deficit declined… …helped by continuous OMOs purchases by RBI
Source:- RBI
Indian Banking system liquidity stayed in the deficit mode for most part of the period.
The daily average liquidity deficit decreased as compared to the previous period. Liquidity as measured by the RBI‟s Liquidity
Adjustment Facility (LAF) stood at a daily average deficit of Rs.~319 bn compared to deficit of Rs.~1.3 trillion in the previous
month.
The RBI conducted Open Market Operations (OMO) purchase of G-secs for an aggregate amount of Rs.~375 billion during the
month in order to provide support to domestic liquidity.
The RBI has also announced OMO Purchase of G-secs for an aggregate amount of Rs. 250 bn for March 2019.
Source:- RBI
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34
Short term rates declined tracking liquidity support by RBI…
Rates at the very short end of the yield curve declined as compared to the previous month.
Continues liquidity support by the RBI and the Repo rate cut in the Sixth Bi-monthly monetary Policy,
prevented the short term rate from rising
Despite the year end demand for funds, wherein liquidity was largely in deficit mode, the short term rates
remained well behaved.
______________________________________________________________________
The G-sec yield curve steepened further in February 2019…
Source:- IDFC Mutual Fund
Source:- IDFC Mutual Fund
The yield in the short term space declined in February 2019, post the rate cut in February 2019 Monetary Policy and continues
Open Market Operation (OMO) purchases by RBI.
The longer end of the yield curve rose marginally seeing uncertainties over government‟s fiscal deficit and borrowing estimates.
The term spread between 3 Months and 13 years continued to rise from 79 bps in December 2019 to 144 bps in February 2019.
Thus, the yield curve witnessed further steeping in February 2019 as compared to the previous month.
Term Spread Dec-18 Jan-19 Feb-19
1-5 Years 30 58 55
1-10 Years 46 69 98
5-10 Years 16 10 43
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Systemic liquidity conditions may tighten given that we are in the last month of the financial year end; however, continued support by the RBI in the form of OMO purchases and
other tools, is likely to keep the liquidity deficit from spiking. Come April 2019, and liquidity conditions could ease, due to seasonal trends seen at the start of the new financial year.
Going forward, in the near term CPI inflation is likely to stay closer to the RBI‟s medium term inflation target of 4%, on the back of very low food inflation, relatively lower crude oil
prices, lower commodity prices leading to decline in input costs, amongst others. Additionally, if the recent moderation in global growth forecasts materialise, then that could lead to
a situation of lower inflation globally as well. That said, there could be uncertainties to the inflation trajectory in the form of reversal in domestic food prices and international crude
oil prices, and demand push inflation on the back of government‟s focus on impetus to consumption. In regards to food inflation, while monsoon is an important factor to consider,
the government‟s supply management has prevented the prices from rising. To sum it all up, in the near term CPI inflation is likely to remain muted given that the uncertainties
regarding the inflation trajectory seem to be balanced at this point.
Trajectory of commodity prices would be an important variable to keep a watch on, as commodity prices have seen an uptick lately, especially crude oil prices. If sustained rise in
commodity prices could impact domestic macro economic variables. However, this needs to be seen in the light of possibility of global growth slowdown, which could keep a lid on
the commodity prices.
Government‟s commitment to fiscal discipline is commendable, however, whether the same is achievable or not amidst growth slowdown, muted GST collections and escalating
geopolitical tensions needs to be tracked very closely.
While the budgeted market borrowings for FY20, were announced on the higher side, if the liquidity support by the RBI in the form of Open Market Operations Purchase of G-secs
continues, then the G-sec supply pressure could be reduced to that extent. Considering the gross market borrowing numbers and the revenue projections of the government, the
bond market is likely to keep a close watch on the revenues receipts and the expenditure going forward. Higher borrowings through PSUs could also keep the pressure on the
longer end yields.
With the world staring at a potential economic slowdown, it could pave way for softer monetary policies going forward. Additionally, the recently announced Sixth Bi-monthly
Monetary Policy for FY19 was clearly focused on providing impetus to growth amidst benign domestic inflation scenario. The growth-inflation scenario building up going ahead
seems to have opened up room for more interest rate cuts in the near term. Thus, the possibility of an interest rate cut in the next monetary policy in April 2019 cannot be ruled out.
The yields had declined across the yield curve tracking the RBI‟s monetary policy outcome and the CPI inflation data for January 2019. However, domestic geo-political tensions
and continued supply of G-secs led to a sharp rise in the yields. The yield curve has steepened relatively, shorter end has declined whereas, the longer end of the yield curve
moved up. Going forward, we expect the yields to trade in a range with a declining bias tracking expectations on further interest rate cuts by the RBI, OMO purchases and global
developments.
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. Also the likely decline in
the short term rates at the start of the new financial year is likely to benefit the shorter end of the yields curve.
Investors can also look at strategies that allow investors to lock in the current attractive short term rates. With benign inflation expectations, investors who can stomach return
volatility can look at investment into long duration funds.
Thus , investments into Short Duration 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 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).
Investors who are comfortable with intermittently volatility, can also look at strategies that focus at the longer end of the yield curve. i.e. High duration funds, with a horizon of 24
months and above.
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:
The Indian equity markets have remained range bound so far in CY2019. The downside to the markets emanated from weak quarterly
results and geopolitcal issues; while the upside to the markets was on the back of lower interest rates and strong FII inflows.
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.
Strong USD, increasing global interest rates, trade wars and upcoming general elections could cause volatility in the equity markets.
Macro indicators continue to look positive like lower inflation, improved domestic liquidity conditions, indications of steady volume growth
continuing in many businesses, as is being witnessed in the strong revenue growth of corporates in Q3FY19 results. However, lower
corporate margins needs to reverse for stronger earnings growth to emerge.
The GDP data for Q3FY19 showed weakness but improving capex trends suggest CY19 could be marked by improving investment demand
from corporates. The consumption friendly interim budget is also likely to help improve revenue growth.
While most factors look positive, events like the general elections and trade wars can have major sentimental impact on the markets which
can give rise to sharp volatility in the near term
From an Equity Mutual Fund perspective, investors should look at Large cap Fund for fresh investments and SIP into Midcap and Small
caps stocks/funds can begin with a longer horizon. Considering the event heavy period, for the Equity investment strategy, we are
recommending 30% Lumpsum and rest 70% staggered over the next 4 months. Investors could also use options like Daily SIP/Monthly SIP
for investing.
On Fixed Income:
Investments into Short Duration 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 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).
Investors who are comfortable with intermittently volatility, can also look at strategies that focus at the longer end of the yield curve. i.e. High
duration funds, with a horizon of 24 months and above.
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. UTI Equity Fund – An actively managed multi cap equity fund
3. HDFC Top 100 Fund – An actively managed large cap equity fund
4. ICICI Prudential Bluechip Fund - A conservative large cap fund
5. Kotak Standard Multicap Fund - An actively managed multi cap fund investing across select sectors with large cap bias
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 focused equity fund
Balanced / Hybrid Funds
1. ICICI Prudential Balanced Advantage Fund – A hybrid fund that dynamically manages exposure to equity and debt
2. SBI Equity Hybrid Fund – An aggressive hybrid fund
3. HDFC Balanced Advantage Fund - A hybrid fund that dynamically manages exposure to equity and debt within a certain range
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
Top Sectoral Allocation of Large/Multi Cap Funds Compared to Nifty 50 Index Sectoral Benchmark Indices Performance
Portfolio as of 31 January 2019. Returns (%) as on 28 February 2019. Returns are Absolute for < = 1year and Compounded Annualized 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)
Over the last 3 months, the Indian equity markets were volatile and closed flat note with positive bias. The benchmark index - S&P BSE Sensex closed marginally up
by 0.42%. The S&P BSE IT index and S&P BSE Oil & Gas index have delivered returns of 6.71% and 3.81%, respectively during the same period, outperforming the
benchmark index. S&P BSE Metal index and S&P Auto index declined sharply by 7.64% and 8.22%, respectively during the period, underperforming the benchmark
index.
Equity Benchmark – Over the last 1 year, Indian equity markets closed on a positive note with S&P BSE Sensex index rose by 4.92%.
Over the last 1 year, IT and FMCG sectors‟ indices amongst other have outperformed the S&P BSE Sensex index, whereas, Metals, Reality, Auto and Oil & Gas
sectors‟ indices amongst other have underperformed the S&P BSE Sensex index. Amongst the sectoral indices (mentioned in above table), S&P BSE IT index was
major gainer, up by 21.98% during the period.
Most of the large cap oriented equity funds continue to have exposure in Banking & Finance, IT, Oil & Gas, FMCG and Auto & Auto Ancillaries.
Funds like HDFC Top 100, ICICI Prudential Bluechip Fund and Kotak Standard Multicap Fund are overweight on Oil & Gas and Energy sector as compared to Nifty 50
index. Funds like Axis Focused 25 Fund and ICICI Prudential Bluechip Fund are overweight on Auto and Auto Ancillaries as compared to Nifty 50 index.
Except Axis Focused 25 Fund, all the other funds (mentioned above) are underweight on Banking & Finance sector as compared to Nifty 50 index.
Sectoral Indices Performance
Indices 3 Mths 6 Mths 1 Yr 2 Yrs 3 Yrs 5 Yrs
S&P BSE IT 6.71 -0.64 21.98 21.25 13.40 9.26
S&P BSE HC -1.59 -11.41 -2.50 -5.43 -3.19 4.88
S&P BSE FMCG -1.32 -9.85 8.07 13.59 16.85 11.85
S&P BSE Bankex 1.53 -6.01 6.05 13.08 24.20 19.56
S&P BSE CG -6.89 -9.33 -10.42 5.57 14.18 10.49
S&P BSE AUTO -8.22 -24.24 -24.27 -6.45 5.46 8.34
S&P BSE METAL -7.64 -21.12 -29.05 -4.85 16.80 4.45
S&P BSE Oil & Gas 3.81 -8.55 -10.99 0.98 18.24 10.37
S&P BSE Realty 3.64 -14.86 -27.24 9.60 19.60 8.33
S&P BSE Sensex 0.42 -7.79 4.92 11.71 15.66 11.17
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40
Top 10 Stocks Allocation (%) of Large/Multi Cap Funds Compared to Nifty 50 Index
Portfolio as of 31 January 2019. Source: Nifty 50 Index - www.nseindia.com
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)
Amongst the above funds, HDFC Top 100 Fund and ICICI Prudential Bluechip Fund have higher allocation to top Banking stocks. It can
be seen that amongst the top stock allocation, other funds are also holding higher allocation to Banking sector stocks.
Kotak Standard Multicap Fund, Reliance Large Cap Fund and HDFC Top 100 Fund are overweight on Larsen & Toubro Ltd whereas, Axis
Focused 25 Fund and ICICI Prudential Bluechip Fund are underweight on it as compared to Nifty 50 index.
ICICI Prudential Bluechip Fund is underweight on Kotak Mahindra Bank Ltd whereas, Kotak Standard Multicap Fund, HDFC Top 100
Fund and Reliance Large Cap Fund has no exposure in it. Axis Focused 25 Fund is overweight on Kotak Mahindra Bank Ltd.
All the above funds are underweight or having no exposure in stocks like HDFC Banks Ltd, Reliance Industries Ltd, HDFC Ltd and ITC
Ltd as compared to Nifty 50 index.
Stocks Axis Focused
25 Fund
Reliance
Large Cap
Fund
ICICI Prudential
Bluechip Fund
Kotak
Standard
Multicap
Fund
HDFC Top 100
Fund
Nifty 50
Index
HDFC Bank Ltd. 7.2 4.6 7.0 7.0 7.1 10.3
Reliance Industries Ltd. 0.0 0.0 2.4 7.1 8.2 9.7
Housing Development Finance Corporation Ltd. 6.3 0.0 4.7 2.0 2.6 7.3
Infosys Ltd. 0.0 5.4 4.9 4.8 7.9 6.6
I T C Ltd. 0.0 4.9 4.1 2.5 4.6 5.5
ICICI Bank Ltd. 2.2 4.8 6.2 6.5 8.6 5.4
Tata Consultancy Services Ltd. 8.7 0.0 0.3 3.7 4.2 4.9
Kotak Mahindra Bank Ltd. 7.3 0.0 1.1 0.0 0.0 3.9
Larsen & Toubro Ltd. 1.6 5.5 3.0 4.9 5.8 3.7
Axis Bank Ltd. 0.0 7.4 4.7 5.0 3.9 3.0
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41
Recommended Equity MF’s: Asset Allocation & Market Capitalization
Portfolio as of 31 January 2019. 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)
Most of the multicap funds continue to remain fully invested into equities except fund like ICICI Prudential Multicap Fund which has around 8%
exposure in Debt & Cash in the portfolio as of January 2019.
Most of the equity funds (mentioned above) have witnessed decrease in exposure to equities during the month of January 2019.
Sundaram Large and Mid Cap Fund and UTI Equity Fund have exposure of around 38% and 42% respectively to mid & small cap stocks, whereas,
ICICI Prudential Multicap Fund has relatively lower exposure of around 18% to mid & small cap stocks.
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42
Risk – Return Matrix of Large Cap & Multi Cap Oriented Equity Funds
Invesco India Contra Fund and Tata Equity P/E
Fund Fund are the best funds in terms of risk to
return matrix in the Multi Cap category.
Kotak Standard Multicap Fund and ICICI
Prudential Bluechip Fund from large cap
category have been able to balance the risk to
reward over the last 3 years period.
In terms of corpus size, Kotak Standard
Multicap Fund is the largest large cap
recommended fund (mentioned in the graph)
with the corpus size of around Rs.21,638 Crs.
(as on January 2019).
Bubble chart displays the positioning of the
schemes‟ on risk (standard deviation) and
return parameters. The size of the bubble
indicates the corpus of the schemes. Funds
closer to X-Axis and away from Y-axis have
better risk adjusted returns.
Data – Rolling Returns.(3 Years, 3 Months) as
on 28 February 2019.
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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43
Tax Planning - ELSS Funds
Returns (%) as on 28 February 2019. Returns are Absolute for < = 1yr and CAGR for > 1
Yr. 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)
Name of Scheme 1 yr 3 yr 5 Yrs
Motilal Oswal Long Term Equity Fund - Reg - Growth
-10.97 17.58 --
L&T Tax Advantage Fund - Reg - Growth -11.28 15.32 15.15
Aditya Birla Sun Life Tax Relief 96 - Growth -3.32 16.20 18.50
Axis Long Term Equity Fund - Growth 0.87 15.25 18.41
Invesco India Tax Plan - Growth -1.90 16.14 17.19
IDFC Tax Advantage (ELSS) Fund - Reg - Growth -11.29 16.67 15.80
DSP Tax Saver Fund - Growth -4.38 16.50 17.05
Tata India Tax Savings Fund - Reg - Dividend -4.68 16.56 17.60
Objective Long-term Capital Appreciation & Tax Planning
Risk Medium to High
Investment Portfolio Equity & Equity Related instruments – Generally Large & Midcap stocks
Investment horizon Long Term ( Lock in period of 3 years) Tax Deduction- Sec 80 C * Investment up to Rs.1.50 Lakh Exempt from Tax
Tax Implications Long Term Capital Gains Tax
Particulars PPF** NSC** ELSS
Lock-in period - Years 15 5 3
Minimum Investment (Rs) 500 100 500
Max Investment for Tax Benefit (Rs) 1,50,000
Risk Low Risk Low Risk Medium to High
Returns 8.00% ^ 8.00% ^ 15% - 19% #
Interest Income / Dividend Tax Free Taxable Taxable
#Returns (%) are historical for last 5 years (CAGR) as on 28 February 2019. Moreover,
past returns cannot be taken as an indicator of future performance. ^Source:
http://indiapost.gov.in. Rates incorporates compounding wherever applicable. *As per
current income tax rates individual falling in highest tax bracket. Note:** Rates for PPF and
NSC are applicable from 1st October 2018.
Comparison of ELSS V/S other tax savings instrument
As per Sec 80C of the Income Tax Act, qualifying investments up to a
maximum of Rs 1.50 Lakh are deductible from total income of the
individual.
There are fixed income options also available under section 80C.
ELSS helps in tax planning as well as provides scope to benefit from
the long term growth potential of equities.
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44
Performance of Mid/Small 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 17% (CAGR) against the Nifty Midcap 100 index which delivered
close to 13% (CAGR) returns.
Currently, the mid/small cap stocks are trading at relatively higher valuations and are expected to remain volatile over the near
term, however, the mid/small cap stocks are expected to perform better over longer period.
Returns (%) as on 28 February 2019. 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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45
Performance of Infrastructure Oriented Funds
India requires investment worth Rs.50 trillion in infrastructure by 2022 to have sustainable development. Sectors like power transmission, roads & highways and
renewable energy is expected to drive the investments. (Source: L&T MF).
With initiatives like „Housing for All‟ and „Smart Cities Mission‟ the government is working on reducing bottlenecks and impeding growth in the infrastructure sector. A sum
of Rs. 2.05 lakh crore (US$ 31.81 billion) will be invested in the smart cities mission. All 100 cities have been selected as of June 2018. (Source: L&T MF).
On the progress side house constructed on PMAYU stood at ~1.36 mn at the end of Q3FY19 vs ~0.4 mn at the end of Q4FY18 and for while for PMAYG the construction
target for FY19E is kept at ~6.5mn vs 4.45 million constructed in FY18. Lastly length of highway construction (KM) for 9M-FY19 stood at record level of 5759 Km vs 4942
Km in 9M-FY18 & 4699 Km in 9M-FY17.
“Order book-to-Sales ratio” which provides multi-year revenue visibility is in the range of 3-4 times for most EPC companies. NHAI expects to award ~7500 kms (~$15B)
during rest of FY19 starting December 2018 (vs. total 7400 kms in FY18). (Source: IDFC MF).
Government has set a target of 20,000 kms of Road awards in FY19, at 17% higher than FY18 which was a high base. The capacity utilization metric has improved to its
best level since FY14 with signs of bottoming-out. Q3FY19 results also saw acceleration in the order book and order flow growth for engineering companies.
Average returns of the recommended Infrastructure funds have outperformed Nifty Infrastructure index over the last five years period and expected to perform better over
the long term investment horizon.
Returns (%) as on 28 February 2019. 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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46
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 9.39 3.02 2.43 -2.05 16.04 15.03
Aditya Birla Sun Life Equity Hybrid 95 Fund 9.20 2.73 1.82 -3.97 12.26 14.31
L&T Hybrid Equity Fund 8.26 3.63 2.68 -5.44 11.35 14.55
ICICI Prudential Equity & Debt Fund 8.59 1.35 1.08 -1.86 14.79 14.97
ICICI Prudential Balanced Advantage Fund 8.42 1.03 0.82 2.53 12.74 12.24
SBI Equity Hybrid Fund 8.34 4.07 2.91 0.76 12.62 15.11
HDFC Hybrid Equity Fund 8.12 3.11 2.44 -2.50 14.56 15.28
NIFTY 50 Hybrid Composite Debt 65:35
Index -- -- -- 5.47 13.84 11.61
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 15% returns over the past 5 years, whereas both Nifty 50 and NIFTY 50 Hybrid
Composite Debt 65:35 indices have delivered average returns of around 11% and 12% respectively each during the same period.
Balanced / Hybrid funds are subject to equity taxation.
*Portfolio data as on 31 January 2019. Returns (%) as on 28 February 2019. 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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47
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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48
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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49
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 2.84 -0.77 -13.74 0.39 12.52 19.35
Large Cap, Aggressive Reliance Large Cap Fund - Growth Large Cap Fund 1.44 0.01 -6.40 -0.17 10.37 17.64
Large Cap, Aggressive HDFC Top 100 Fund - Growth Large Cap Fund 0.30 -0.04 -6.01 1.09 8.44 19.02
Large Cap, Conservative ICICI Prudential Bluechip Fund - Growth Large Cap Fund 1.64 0.08 -8.08 -0.63 8.84 16.67
Large Cap, Conservative Kotak Standard Multicap Fund - Reg - Growth Multi Cap Fund 1.39 0.01 -8.56 -0.19 8.44 17.59
Multi Cap, Aggressive Invesco India Contra Fund - Growth Contra Fund 1.18 -1.45 -10.77 -3.72 11.54 18.86
Multi Cap, Aggressive ICICI Prudential Multicap Fund - Growth Multi Cap Fund 2.05 -0.13 -8.60 0.19 7.32 15.93
Multi Cap, Aggressive SBI Large & Midcap Fund - Growth Large & Mid Cap Fund -0.19 -1.14 -7.43 -4.12 7.56 14.77
Multi Cap, Conservative Aditya Birla Sun Life Equity Fund - Growth Multi Cap Fund 0.75 -2.01 -9.58 -4.53 5.76 17.76
Multi Cap, Conservative HDFC Capital Builder Value Fund - Growth Value Fund 0.27 -1.42 -10.39 -6.31 8.44 17.49
Multi Cap, Conservative SBI Magnum Multi Cap Fund - Growth Multi Cap Fund 0.96 0.30 -8.73 -4.47 7.04 15.86
Multi Cap, Conservative UTI Equity Fund - Growth Multi Cap Fund 2.00 2.06 -11.20 3.95 10.61 15.24
Mid Cap, Aggressive HDFC Small Cap Fund - Growth Small cap Fund 0.43 -1.99 -10.17 -10.93 13.32 22.30
Mid Cap, Aggressive L&T Midcap Fund - Reg - Growth Mid Cap Fund -0.45 -3.70 -13.05 -13.37 5.85 18.51
Mid Cap, Aggressive SBI Focused Equity Fund - Growth Focused Fund 2.16 2.03 -7.81 -2.52 11.95 16.09
Infra Sector, Aggressive L&T Infrastructure Fund - Reg - Growth Sectoral 1.23 -5.98 -14.87 -18.31 4.14 18.65
Aggressive Balanced/Hybrid HDFC Balanced Advantage Fund - Growth Dynamic Asset Allocation
or Balanced Advantage 0.32 -0.22 -4.85 -2.05 6.02 16.04
Aggressive Balanced/Hybrid L&T Hybrid Equity Fund - Reg - Growth Aggressive Hybrid Fund 0.68 -2.54 -8.62 -5.44 4.74 11.35
Conservative Balanced/Hybrid ICICI Prudential Balanced Advantage Fund - Reg - Growth Dynamic Asset Allocation
or Balanced Advantage 0.83 0.89 -0.82 2.53 7.20 12.74
Conservative Balanced/Hybrid SBI Equity Hybrid Fund - Growth Aggressive Hybrid Fund 0.76 0.76 -4.10 0.76 8.77 12.62
Equity Savings Fund Kotak Equity Savings Fund - Reg - Growth Equity Savings 0.85 1.21 -0.54 4.40 7.56 9.11
Nifty 50 1.23 0.59 -8.06 2.86 10.25 15.32
Nifty Midcap 100 0.39 -3.38 -15.20 -14.97 0.73 13.19
S&P BSE 200 0.96 -0.10 -9.53 -0.63 8.74 15.50
Nifty Infrastructure -0.81 -5.07 -10.27 -15.49 -1.35 8.14
NIFTY 50 Hybrid Composite Debt 65:35 Index 0.97 1.34 -3.45 5.47 9.77 13.84
Returns (%) as on 28 February 2019. 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)
______________________________________________________________________
50
Fixed Income Options
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51
Performance of recommended Long Duration/Dynamic Bond Funds
Please note that returns data for Crisil indces is not available.
Returns (%) as on 28 February 2019. Returns are absolute for < = 1year and CAGR for > 1 year. Portfolio as of 31 January 2019.
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% 6.00 7.78 1.47 4.49 7.09 4.75 7.56
IDFC Bond Fund - Income Plan - Reg - Growth Medium to Long
Duration Fund 100.00% 6.00 7.77 1.40 4.45 6.96 4.49 7.31
Reliance Dynamic Bond Fund - Growth Dynamic Bond 100.00% 7.35 7.80 1.64 3.40 5.88 4.31 7.44
UTI Bond Fund - Growth Medium to Long
Duration Fund 67.25% 4.27 9.53 -0.87 -0.06 2.83 2.98 6.68
Conservative Funds
Kotak Dynamic Bond Fund - Reg - Growth Dynamic Bond 78.02% 4.48 8.37 2.94 4.99 8.23 6.97 9.10
SBI Dynamic Bond Fund - Growth Dynamic Bond 100.00% 3.64 7.32 1.75 3.88 6.62 4.69 8.24
ICICI Prudential Bond Fund - Growth Medium to Long
Duration Fund 95.81% 3.71 8.34 2.11 3.53 5.81 5.28 7.43
UTI Dynamic Bond Fund - Reg - Growth Dynamic Bond 76.92% 3.61 9.66 -0.63 0.34 3.51 3.70 7.52
NIFTY Short Duration Debt Index -- -- -- 2.53 4.28 7.41 6.77 7.68
ICRA Composite Bond Fund Index -- -- -- 2.60 5.31 7.81 6.27 8.53
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52
Performance of recommended Short Duration Funds
Please note that returns data for Crisil indces is not available
Returns (%) as on 28 February 2019. Returns are absolute for < = 1year and CAGR for > 1 year. Portfolio as of 31 January 2019.
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
DSP Banking & PSU Debt Fund - Reg - Growth Banking and PSU Fund 100.00% 2.15 7.86 2.41 4.31 7.07 6.29 7.72
HDFC Corporate Bond Fund - Growth Corporate Bond Fund 100.00% 2.69 8.29 2.36 4.14 7.25 6.57 8.12
Reliance Banking & PSU Debt Fund - Reg - Growth Banking and PSU Fund 84.17% 3.24 8.30 2.23 4.02 7.07 6.39 7.60
ICICI Prudential Banking & PSU Debt Fund - Reg - Growth Banking and PSU Fund 79.69% 1.73 8.43 1.80 3.18 6.12 6.08 8.34
Conservative Funds
HDFC Short Term Debt Fund - Growth Short Duration Fund 94.06% 1.38 8.67 2.16 3.94 7.42 6.74 7.74
Kotak Corporate Bond Fund - Std - Growth Corporate Bond Fund 93.37% 1.08 8.54 2.36 4.09 7.97 7.20 8.21
SBI Banking and PSU Fund - Growth Banking and PSU Fund 88.30% 2.15 7.88 1.81 3.58 7.20 6.73 7.28
Aditya Birla Sun Life Corporate Bond Fund - Reg - Growth Corporate Bond Fund 88.59% 1.54 8.45 2.29 4.42 7.66 6.91 8.05
UTI Banking & PSU Debt Fund - Reg - Growth Banking and PSU Fund 85.09% 0.73 8.20 0.07 1.73 4.99 5.56 7.51
ICICI Prudential Corporate Bond Fund - Reg - Growth Corporate Bond Fund 100.00% 1.57 8.36 2.09 3.71 6.90 6.46 7.71
UTI Short Term Income Fund - Reg - Growth Short Duration Fund 85.35% 1.45 8.49 1.68 3.03 6.23 5.94 7.44
ICICI Prudential Short Term Fund - Growth Short Duration Fund 83.57% 1.89 8.67 2.09 3.66 6.45 6.12 7.99
NIFTY Short Duration Debt Index -- -- -- 2.53 4.28 7.41 6.77 7.68
ICRA Composite Bond Fund Index -- -- -- 2.60 5.31 7.81 6.27 8.53
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