1

Role of Fund Manager:

Investing For PFs In

Equity Market

Mr. Yogesh Bhatt

Senior Fund Manager

August 3, 2016

2

Equity: Best asset class for next 2-3 years

Market Outlook

3

Benign Inflation

May-16 CPI: 5.76%

May-16 WPI: 0.79%

Low Current Account Deficit:

1.1% of GDP in FY16

Low Fiscal Deficit:

3.5% of GDP in FY17E

Government Reforms

Limited Trade Exposure: About 3.5% of Indian exports and 1.5% of imports are from the UK

Foreign Exchange Reserves: Over $360 billion

Source: Bloomberg

Fundamentals that keep India Insulated if UK exits the EU

India Remained Insulated to BREXIT

4

Marketcap to GDP Below Long Term Average

0

20

40

60

80

100

120

140

160

38412

38504

38596

38687

38777

38869

38961

39052

39142

39234

39326

39417

39508

39600

39692

39783

39873

39965

40057

40148

40238

40330

40422

40513

40603

40695

40787

40878

40969

41061

41153

41244

41334

41426

41518

41609

41699

41791

41883

41974

42064

42156

42248

42339

42430

42522

Mcap To TTM GDP

Marketcap to GDP @ 72%;

7% below Long Term Average

Long Term Average 79%

Source: Bloomberg; Data as of June 30, 2016;

Whenever Marketcap to GDP levels are low invest in equities

5

Largecaps Better Play Than Midcaps

Data source: CITI Research, <$4bn is considered as representing midcap companies.

Earnings growth in large-caps companies have been higher than mid-cap

companies.

6

Catalysts For Bull Market In Next 2 – 3 Years

• Increase in capacity utilization (CU) to help topline in near term

Operating Leverage

• This will pull down interest rates and help capex once CU improves

Deleveraging in Real Estate

• FDI gates have been opened in several sectors recently

Government Policies

FDI – Foreign Direct Investment

7

Our View

India’s macro-economic environment has become stable.

Currency has shown stability with Foreign Exchange Reserves growing to over US $360

billion

Low commodity prices and government's policies are expected to result in Low Fiscal

Deficit of 3.5% of GDP in FY17E

Stable macros can keep India fundamentally insulated from any material impact from

global risk off events in the long run.

At micro-level too there are expectations of improvement.

The combined effect of 7th pay commission and good monsoon could result higher

discretionary spending during the festival period and provide boost to earnings.

India remains a bright spot among its peers and looks attractive on most of the parameters

such as Marketcap to GDP, expected growth rate, macro stability and proactive government

policies.

We believe equities shall be the best asset class over the next 2 to 3 years and investors could

continue to invest with a long term view.

8

Investment Options

9

Active Vs Passive Funds

• Active funds help identifying stocks at early stage of growth and hence are able to

generate alpha

• Indian Markets are relatively in-efficient compared to their counterparts in developed

markets

• In-efficient market provides scope for identifying alpha bets

• Hence, active funds dominate AUM share in India vis-à-vis in developed markets.

• Out of the total Equity AUM for June 2016, 93.9% constitute actively managed funds

and 6.1% constitute passive funds (Index and ETF)

10

Setting investment objective

Formulating investment plan based on investor‘s need

Establishment of portfolio strategy

Role of Fund Manager: For Active Return

11

Equity Investments shall be timed based on market valuations

One should consider investing aggressively when market valuations low

Conversely, invest systematically when markets valuations are high

Equity Investment Strategy

12

40

90

140

190

240

290

340

390

440

May/2008 Jul/2009 Sep/2010 Nov/2011 Jan/2013 Mar/2014 May/2015 Jul/2016

ICICI Prudential Focused Bluechip Equity Fund - Ret - Growth ICICI Prudential Value Discovery Fund - Growth S&P BSE Sensex

ICICI Prudential Value

Discovery Fund

19.81% CAGR

ICICI Prudential

Focused Bluechip

Equity Fund

15.11% CAGR

S&P BSE Sensex

6.57% CAGR

Value rebased to 100

Value Addition by Fund ManagerMay ‘08 to Jul ‘16

13

Book Profits/ Stay Invested

Invest Systematically

Invest in Equities

Aggressively Invest in Equities

Equity Valuation index is calculated by assigning equal weights to Price-to-Earnings (PE), Price-to-Book (PB), G-Sec*PE and Market Cap to GDP ratio. G-Sec

– Government Securities. GDP – Gross Domestic Product; Data as on July 26, 2016

Our equity valuation index indicates that investors should

invest systematically in equities.

Composite Index, 102.20

0

20

40

60

80

100

120

140

160

180

Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16

Equity Valuation Index

14

ICICI Prudential Balanced

Advantage Fund

Wisdom Of Buying Low & Selling High

MoneyBack

FeatureSMART SIP

15

Dynamic Asset Allocation Strategy

Needs ExpertiseInvolves

Transaction CostHigher Tax

Liability

Emotions may hamper

decisions

Buy Low

Sell High

Generate Alpha

& Limit Loss

Is it as easy as it sounds?

Dynamic Asset Allocation Strategy

helps in generating reasonable returns even in volatile markets.

16Source: MFIE, BSE India; Above graph is for illustration purpose only. Source: www.nseindia.com & ICRA

Net Equity Levels vis-à-vis Sensex Levels

25

35

45

55

65

75

85

15000

17000

19000

21000

23000

25000

27000

29000

Ne

t E

qu

ity E

xp

os

ure

(%

)

Se

ns

ex

Le

ve

ls

Sensex Levels vis-a-vis Funds benefitting from Net Equity Exposure (%)1st March 2010 – 30th June 2016

Sensex Level Net Equity Exposure %

Buy

Lo

w

Sell

High

17Source: MFIE, BSE India; Above graph is for illustration purpose only. Source: www.nseindia.com & ICRA

Net Equity Levels vis-à-vis Nifty 50 P/BV Ratio

2.60

2.80

3.00

3.20

3.40

3.60

3.80

30.00

35.00

40.00

45.00

50.00

55.00

60.00

65.00

70.00

75.00

80.00

Nifty

50 P

rice to B

ook R

atio

Net E

quity L

evels

of F

unds b

enefitt

ing fro

m

exp

osu

re(%

)

Nifty 50 Price to Book Ratio v/s Funds that benefit from changes in Net Equity Levels

Net Equity Exposure of BAF % P/B Ratio Nifty

18

Returns in Flat Market Conditions

Source: MFIE & Internal, Past performance may or may not be sustained in future

Sensex Level

(Flat Market)

Period

(From & To)Sensex’s Movement

BAF’s NAV

Movement

Sensex Return

(CAGR)^

ICICI Prudential Balanced Advantage

Fund (CAGR)

16k to 16k25 May 2010

05 Jun 2012

16022

16021

12.10

14.350% 8.75%

17k to 17k03 Mar 2010

21 Jun 2012

17000

17033

12.32

14.710% 8.00%

18k to 18k04 Feb 2011

28 Aug 2013

18008

17996

13.30

16.000% 7.47%

19k to 19k21 Jan 2011

12 Jun 2013

19008

19041

13.67

16.970% 9.46%

20k to 20k21 Sep 2010

30 Jan 2013

20002

20005

13.92

17.420% 9.96%

21k to 21k04 Nov 2010

18 Oct 2013

20894

20883

14.35

18.160% 8.29%

23k to 23k09 May 2014

29 Feb 2016

22994

23002

20.53

23.720% 8.30%

24k to 24k16 May 2014

20 Jan 2016

24122

24062

21.00

24.750% 10.26%

25k to 25k05 Jun 2014

09 Dec 2015

25020

25036

21.94

25.540% 10.57%

26k to 26k02 Jul 2014

20 Apr 2016

25841

25844

22.44

26.310% 9.23%

27k to 27k02 Sep 2014

30 Jun 2016

27019

27000

23.45

27.450% 9.00%

19

Equity Mutual Fund Schemes

Scheme Description AUM

ICICI Prudential

Balanced

Advantage Fund

• Uses in-house model, based on long term price to book value

with a view to limit downside risk during falling market, while

capturing the upside of rising market.

• Maintain minimum 65% allocation to equities

Rs. 12,418 Crs.*

ICICI Prudential

Value Discovery

Fund

• A diversified Flexicap Fund

• Investment based on an evaluation of several parameters

such as ―Price to Earning‖, ―Price to Book Value‖, ―Dividend

Yield‖ etc.

Rs. 13,205 Crs.*

ICICI Prudential

Focused

Bluechip Equity

Fund

• A Pure Largecap Fund

• Invests in high conviction bluechip companies

• Maintains diversification across sectors inline with the

benchmark

Rs. 11,126 Crs.*

ICICI Prudential

Dynamic Plan

• A diversified fund investing in a mix of large and midcap stocks

• Manages Equity levels in 65% to 100% range based on in-

house Price/Book Value modelRs. 5,494 Crs.*

*Average Asset Under Management as on June 30, 2016

20

Exchange Traded Funds (ETFs) & Index Funds

Scheme Description AUM

ICICI Prudential

Nifty iWIN ETF

• An ETF which replicates the CNX Nifty Index. Rs. 551 Crs.*

ICICI Prudential

Sensex iWIN ETF

• India‘s first ETF based on S&P BSE Sensex Index.

• Track record of more than 12 years (Inception date: January 10,

2003).

Rs. 5 Crs.*

ICICI Prudential Nifty

Index Fund

• Index Fund which replicates the CNX Nifty Index. Rs. 222 Crs.*

*Average Asset Under Management as on June 30, 2016

21

Performance – Equity Funds (CAGR)

* Performance for regular plan as on July 27, 2016

Large Cap Funds 1 Year (%) 3 Years (%) 5 Years (%) 7 Years (%) 10 Years (%)

ICICI Prudential Focused Bluechip Equity

Fund8.02 20.34 14.03 15.52 —

ICICI Prudential Select Large Cap Fund 10.71 19.86 12.90 12.96 —

ICICI Prudential Top 100 Fund 11.50 20.74 14.18 13.94 13.41

Nifty 50 Index 3.95 13.72 9.56 9.59 10.71

Multicap Funds 1 Year (%) 3 Years (%) 5 Years (%) 7 Years (%) 10 Years (%)

ICICI Prudential Value Discovery Fund 7.79 35.20 20.34 22.02 18.87

ICICI Prudential Multicap Fund 9.36 24.70 15.19 14.94 13.65

S&P BSE 500 5.75 17.72 10.15 10.22 11.22

22

Performance – Dynamic Asset Allocation

Funds (CAGR)

* Performance for regular plan as on July 27, 2016

Dynamic Asset Allocation

Funds1 Year (%) 3 Years (%) 5 Years (%) 7 Years (%) 10 Years (%)

ICICI Prudential Balanced Advantage

Fund8.98 18.70 14.33 14.49 —

ICICI Prudential Dynamic Fund 9.21 21.59 13.33 15.14 15.49

Nifty 50 Index 3.95 13.72 9.56 9.59 10.71

23

Traditional Mutual Funds vs. ETF

Investors buy and sell on an exchange and are insulated from each other’s actions.

Stock

ExchangeMutual Fund

Investors interact with the fund to buy or sell shares

Buyers

Sellers

Stock

ExchangeICICI Prudential ETF

Buyers

Sellers

24

Advantages of ETF’s

Transparency • Investors know the ETF holdings, price and costs

Liquidity• ETFs offer two sources of liquidity:

• Traditional liquidity measured by secondary market trading volume

Diversification

• ETFs provide immediate exposure to a basket or group of securities for instant

diversification

• Broad range of asset classes including equities, bonds, commodities, investment

themes, etc

Flexibility• ETFs are listed on exchanges and can be traded at any time the market is open

• Pricing is continuous throughout the day

Cost

effectiveness • ETFs offer a cost-effective route to diversified market exposure

25

46 member investment team comprising of Research Analyst, Dealers, Fund Managers & CIO.

Well defined investment process

Why ICICI Prudential AMC?

26

GARP (Growth at Reasonable Price) investment philosophy and process

Discipline to stick to the investment mandate of the fund

Rigorous on ground research enabling qualitative and quantitative assessment of over top 250

companies

Research output plus risk understanding forms the basis for portfolio construction

Focused on ‗convincing ideas‘ after active debate and arguments

Ongoing review supports process integrity and self discipline

Sustainable Edge - Balance of Managing Scale and Attention to Detail

Why ICICI Prudential AMC?

27

Thank you