market outlook presentation december - 2014 outlook presentation december - 2014 2 key highlights...
TRANSCRIPT
1
Market Outlook Presentation
December - 2014
2
KEY HIGHLIGHTS
Equity Market Update
Cycle, Triggers and Valuations
Debt Market Update
Outlook
Recommendations
3
Equity Market Update
• Sensex continued its upward momentum in Nov '14
• FII buying increased (USD 2.3 bn) in Nov'14 while DII's increased their selling (USD 1.2
bn)
• Falling oil prices (5 year low) largely positive for the economy
• Macro data has been encouraging
• Midcap and Smallcaps outperformed Large caps last month
• Bank, Realty, and Pharma were the top 3 performing sectors while Consumer durables,
Metals and Oil and Gas underperformed
Source: Bloomberg. FII – Foreign Institutional Investors. DII – Domestic Institutional Investors
4
Market Performance During November -14
Source: Bloomberg
• Small Caps and Mid Caps outperformed large caps during November 2014
• S&P BSE Realty rallied 8.35% after the government relaxed FDI (Foreign Direct
Investment) norms for the sector
• S&P BSE Metal declined 4.59% due to sell-off in metal stocks amid China’s
disappointing manufacturing data
4.43
3.112.97
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
S&P BSE Mid
Cap
S&P BSE Small
Cap
S&P BSE Sensex
%
Indices MovementNov-14 (%
change)
S&P BSE Bankex 8.75%
S&P BSE Realty 8.35%
S&P BSE Healthcare 4.20%
S&P BSE Teck Index 3.72%
S&P BSE Auto 3.45%
S&P BSE FMCG 3.16%
S&P BSE Small Cap 3.11%
S&P BSE Capital Goods 2.81%
S&P BSE PSU 0.81%
S&P BSE Oil & Gas -2.20%
S&P BSE Consumer Durables -2.31%
S&P BSE Metals -4.59%
5
KEY HIGHLIGHTS
Equity Market Update
Cycle, Triggers and Valuations
Debt Market Update
Outlook
Recommendations
6
Equity Cycle still away from PEAK
Source: Bloomberg. IIP – Index of Industrial Production
IIP Growth
still in single
digit
Credit
Growth too
low at 11%
Government
Revenue
deficit high
When can market clock the peak of this cycle?
IIP growth is in
Double Digit
Government
Revenue Deficit
is low
Bank Credit
Growth reaches
18 -20% levels
7
Triggers in the near term..
Source: Bloomberg. FDI – Foreign Direct Investment. GDP – Gross Domestic Products
May improved
investment sentiments
May boost Capital
Expenditure Cycle
May increase GDP
growth by around 1%
FDI in
Insurance
Land
Acquisition
Bill
Goods &
Services
Tax
Markets may
continue its run-up..
Fuelled by these
triggers..
8
Markets just above fairly value zone..
Source: Bloomberg
• The equity valuations are marginally above fair value zone
• However, Forward Valuations of around 16x are within fair value zone
and gives comfort for investing in equities.
8.09.010.011.012.013.014.015.016.017.018.019.020.021.022.023.024.025.026.027.0
7,0008,0009,000
10,00011,00012,00013,00014,00015,00016,00017,00018,00019,00020,00021,00022,00023,00024,00025,00026,00027,00028,00029,00030,000
Sensex (LHS) Valuations (RHS)
FAIR VALUE PLUS 16x-19x
FAIR 13x-15x
ATTRACTIVE 11x-12x
CHEAP 8x-10x
STRETCHED 19x PLUS
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KEY HIGHLIGHTS
Equity Market Update
Cycle, Triggers and Valuations
Debt Market Update
Outlook
Recommendations
10
Money Market Change in basis points
Tenure CD (%) Change CP (%) Change
1M 8.14 -12 8.36 -09
3M 8.34 -13 8.55 -16
6M 8.47 -17 8.78 -28
12M 8.65 -14 8.96 -31
Bond Market Change in basis points
TenureG-Sec
(%)Change
AAA
CB
(%)
Change
1Y 8.33 -06 8.59 -07
3Y 8.18 -05 8.45 -28
5Y 8.14 -14 8.60 -20
10Y 8.09 -19 8.55 -26
Spread Market Data in basis points
Tenure AAA AA A
1Y 26 93 175
3Y 27 87 172
5Y 46 103 190
10Y 46 108 194
Yield Movements
Source: CRISIL – CD – Certificate of Deposit, CP – Commercial Papers, G-Sec – Government Securities
Yields came down sharply last month
11
Yields may continue to fall..
Source: Creditmeter
• Lower Crude can cool down inflation further and add to positive
sentiments
• Falling Inflation can provide comfort to the RBI to look at easing rate
cycle
65
70
75
80
85
90
95
100
105
110
115
120
Oct-13
Oct-13
No
v-13
Dec-13
Jan
-14
Feb
-14
Mar-14
Ap
r-14
Ap
r-14
May-14
Ju
n-14
Ju
l-14
Au
g-14
Sep
-14
Sep
-14
Oct-14
No
v-14
Brent crude oil price ($ per barrel)
1
3
5
7
9
11
13
Nov-
13
Dec-
13
Jan-
14
Feb-
14
Mar-
14
Apr-
14
May-
14
Jun-
14
Jul-
14
Aug-
14
Sep-
14
Oct-
14
%
Inflation
WPI CPI
Supported by falling Crude Prices and Low Inflation
12
G-Sec yields below Repo Rate
• Post RBI policy, 10 Yr. G-Sec yields moved down to 7.95%, which is below Repo Rate of
8%.
• G-Sec yields are expected to stay below Repo Rate and run ahead of RBI Policy.
• During 2001 to 2004 and in 2008, G-sec yields came down sharply and were
moving ahead of the RBI Rate Cuts.
Source: Bloomberg, GIND – Government of India. 'Past performance may or may not sustained'
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5
6
7
8
9
10
11
10 Yr. G-Sec and Repo Rate
GIND10YR Index Repo Rate
13
RBI Policy – Just a Step away from Rate Cut
• RBI kept key interest rates unchanged at its fifth bi-monthly monetary
policy meeting.
• Forward guidance was of moving towards a Rate Cut by early next year,
if current momentum of low inflation continue to stay.
• RBI also lowered its inflation projection from 8% to 6%
• We expect a 50bps rate cut by RBI in the coming quarter.
RBI – Reserve Bank of India
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KEY HIGHLIGHTS
Equity Market Update
Cycle, Triggers and Valuations
Debt Market Update
Outlook
Recommendations
Softer crude oil and commodity prices and the concurrent
drop in the retail inflation (especially food) are positive
developments for market.
We believe the current market cycle is still away from its
peak and may continue to rally.
Enough triggers in the markets going ahead.
We continue to remain Cautiously bullish on markets, and
believe, that it may be good time to invest in equities with 3
years and above investment horizon.
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EQUITY OUTLOOK
16
DEBT OUTLOOK
• Combination of monetary policy actions and favorable global price
developments have created a conducive environment for the Reserve
Bank of India.
• The recent policy statement reflects RBI’s confidence on achieving its
target of bringing inflation down to 6% or below by early 2016.
• We expect 50 bps cut in benchmark repo rate in next quarters.
• We continue to recommend investors to add duration funds to their
portfolios at this juncture.
• Also, since the curve has now almost inverted, on risk adjusted
parameter, 1 to 5 year maturity segment seems relatively better for
investments.
17
KEY HIGHLIGHTS
Equity Market Update
Cycle, Triggers and Valuations
Debt Market Update
Outlook
Recommendations
18 Note: None of the aforesaid recommendations are based on any assumptions. These are purely for reference and it is advisable
to consult the financial advisors before investing
EQUITY RECOMMENDATIONS
Types of Investor Funds Rationale
For long term investors
and as a part of core
mutual fund portfolio
1. ICICI Prudential Focused
Bluechip Equity Fund
2. ICICI Prudential Value
Discovery Fund
3. ICICI Prudential Target Returns
Fund (There is no guarantee or
assurance of returns)
These funds are suitable for investors
who are willing to invest for a fairly
long term with an aim to benefit from
the full investment cycle.
For investors who track
their investments
frequently
1. ICICI Prudential Dynamic Plan
2. ICICI Prudential Balanced
Advantage Fund
3. ICICI Prudential Balanced Fund
These funds have the potential to
specifically benefit from range bound
equity markets and can generate
reasonable return per unit of risk.
These funds are suitable for investors
seeking to participate in equities with
relatively lower risk.
For investors who have 3
year investment horizon
1. ICICI Prudential Infrastructure
Fund
2. ICICI Prudential Banking &
Financial Services Fund
3. ICICI Prudential Midcap Fund
These funds can benefit from revival in
the economy and provides aggressive
investment opportunity over next three
years. These funds are suitable for
investors aiming for absolute returns
rather than risk adjusted returns over
next three years.
19 Note: None of the aforesaid recommendations are based on any assumptions. These are purely for reference and it is advisable to
consult the financial advisors before investing
DEBT RECOMMENDATIONS
Investment Horizon Funds Relevance
15 to 30 days
ICICI Prudential Savings
Fund
Investor with surplus cash may consider
investing in this fund for short to medium
term deployment.
6 months and above
ICICI Prudential Short Term
Plan
Yield curve is turning inverted and provides
potential opportunity to generate favourable
risk-adjusted returns.
18 months and above
ICICI Prudential Regular
Savings Fund
Short term yields at current levels provide
potential entry point as the scheme aims to
earn from accrual income.
24 months and above
3 Years and above
ICICI Prudential Income
Plan
ICICI Prudential Long Term
Plan
Positive view on interest rates in the medium
term pronounces possibility of earning
potential capital appreciation in the scheme.
3 Years and above
ICICI Prudential Corporate
Bond Fund
Yields in 1 to 5 year maturity segment provide
opportunity to earn reasonable accrual as well
as potential capital appreciation.
20
PRODUCT LABELLING
21
PRODUCT LABELLING
22
PRODUCT LABELLING
23
PRODUCT LABELLING
Note - Risk may be represented as:
(BLUE) investors understand that
their principal will be at low risk
(YELLOW) investors understand that
their principal will be at medium risk
(BROWN) investors understand that their
principal will be at high risk
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DISCLAIMER
Mutual Fund investments are subject to market risks, read all scheme
related documents carefully.
All figures and other data given in this document are as on 3rd
December 2014 unless stated otherwise. The same may or may not be relevant at a future date. The
AMC takes no responsibility of updating any data/information in this material from time to time. The information shall not be altered in any way, transmitted to, copied
or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Prudential Asset Management
Company Limited.
Prospective investors are advised to consult their own legal, tax and financial advisors to determine possible tax, legal and other financial implication or consequence of
subscribing to the units of ICICI Prudential Mutual Fund.
Data source: Bloomberg, except as mentioned specifically.
Disclaimer: In the preparation of the material contained in this document, ICICI Prudential Asset Management Company Ltd. (the AMC) has used information that is
publicly available, including information developed in-house. Some of the material used in the document may have been obtained from members/persons other than
the AMC and/or its affiliates and which may have been made available to the AMC and/or to its affiliates. Information gathered and material used in this document is
believed to be from reliable sources. The AMC however does not warrant the accuracy, reasonableness and / or completeness of any information. We have included
statements / opinions / recommendations in this document, which contain words, or phrases such as “will”, “expect”, “should”, “believe” and similar expressions or
variations of such expressions, that are “forward looking statements”. Actual results may differ materially from those suggested by the forward looking statements due
to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic and political conditions in India
and other countries globally, which have an impact on our services and / or investments, the monetary and interest policies of India, inflation, deflation, unanticipated
turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices etc.
ICICI Prudential Asset Management Company Limited (including its affiliates), the Mutual Fund, The Trust and any of its officers, directors, personnel and employees,
shall not liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in
any way arising from the use of this material in any manner.
Further, the information contained herein should not be construed as forecast or promise. The recipient alone shall be fully responsible/are liable for any decision taken
on this material.
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