DebtFundsPicks_130516

7/25/2019 DebtFundsPicks_130516

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Debt funds & picksMay 2016


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Index

Macro wrap

Debt market wrap

Debt market view

Fund recommendations Selection criteria


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Macro wrap: Indian inflation

Consumer prices in India went up by 5.39% year on year (YoY) in April of 2016, accelerating from a 4.83% rise in

the previous month and higher-than-market expectation of 5%.

Food inflation also reached a three-month high. The cost of food and beverages rose 6.21% YoY (5.27% in March),

provisional estimates showed. The food index alone accelerated to 6.32% as compared with 5.21% in the previous

month.

e cos o c o ng an oo wear wen up . o . n arc ; ue an g rose . . ; an

housing prices increased 5.37% (5.31%).

A year ago, the inflation rate was lower at 4.87%.


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Macro wrap: Industrial production

Industrial output in India increased by a meagre 0.1% YoY in March of 2016, slowing sharply from a 2% rise in the

previous month and much lower than the market expectation of a 2.5% gain.

Manufacturing shrank 1.2% with production of electrical machinery & apparatus falling the most (-36.2%),followed by food products and beverages (-15%) and publishing, printing and reproduction of recorded media

(-9.9%).

In addition, the mining sector fell by 0.1% while electricity production jumped 11.3%.


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10-year bond movement


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Debt market wrap

Liquidity

Systemic liquidity was mostly comfortable during the week, with the call money rate remaining

below the repo rate. The borrowing rate settled at 6.25% on May 6 as against 6.20% on April 7.

Inflows from the governments month-end spending, coupled with fund infusions from the RBI in

the form of repo auctions ensured that banks had sufficient funds.

The apex bank conducted four repo auctions during the week. An overnight and 14-day term repo

auction were conducted in the first two sessions for a combined notified amount of Rs33 500

crore.

In the last session of the week, the central bank conducted two repo auctions of 14-day and 4-

day durations, disbursing a further Rs33,500 crore into the banking system.

In the first half of the week, the call rate rose briefly owing to redemption of term repo auctions

held in earlier sessions and due to outflows related to payment of gilts purchased in the previousweeks ilt sale.


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Bonds and currency movement

Government bonds remained locked in a tight range in the absence of strong triggers. The yield

Debt market wrap

of the 10-year benchmark 7.59% 2026 paper settled at 7.44% on May 6, broadly unchanged from

that of April 7.

Intra-week, bond prices fluctuated tracking movement in global crude oil prices, the USbenchmark treasury yields and the rupees exchange rate against the dollar.

Prices also dipped marginally as market players trimmed positions to absorb the fresh supply of

papers from the weeks bond auction. In the gilt sale, the banking regulator auctioned the 7.35%

, . , .

a total notified Rs15,000 crore. The coupon rate for the new gilt has been set at 7.61%.

Prices were kept in check in the last session as market players awaited the release of US non-

farm payrolls data.

The rupee weakened against the US dollar owing to both domestic and overseas factors. The

rupee was put under pressure at the start of the week as Indias latest manufacturing PMI figuresprompted outflows from domestic equities.

Dollar demand from state-owned banks on behalf of importers also pulled the rupee down.


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The latest reading on CPI inflation and industrial production was a double whammy as growth

Debt market outlook

The next big trigger for bond prices could be monsoon.

We would suggest a mix of 60:40 allocation mix between short-term/accrual and duration

funds.


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Recommendations & performance-accrual funds

Performance as on May 9, 2016

d i & f


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Recommendations & performance-duration funds

* Less than 1-year simple annualised returns, greater than 1-year compound annualised returns

Performance as on May 9, 2016


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Fund picks: Across categories

Ultra short-term funds

Liquid funds

Performance as on 9th, May,2016


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Annexure: Criteria for scheme selection

Selection among the top rated 4-5 AMCs with a proven track record in debt

e ec on ou o s o , un ess a s ra e y s compe n ase on n erac on w a

outside of this universe

Track record of at least 2 years of existence for the fund though there could be some

exceptions at times

Threshold AUM of at least Rs200 crore and above, though at times strategy would merit

consideration as an exception

uper or r s a uste returns

Di l i


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Mutual funds and the underlying investments are subject to market risks and there is no guarantee, implied or otherwise, that the general

objective of the fund or any other specific performance targets will be achieved. Past performance is not indicative of future results. Such

past performance may or may not be sustained in future. Investors are not being offered any guaranteed or assured returns. Please read

the offer document carefully before investing.

Disclaimer

The third party investment products or services marketed / distributed do attract the general and specific risk factors peculiar to those

respective products or services, which would be mentioned by the manufacturers of those products in the respective product

documentation. The prospective investors in such third party products are advised to read and understand those risk factors & disclaimers,

in addition to what has been stated herein. We have not verified and do not take any responsibility for any statements, numbers or claimsmade, omitted to be made or implied in any documentation, presentations etc. which have been created by the manufacturers of such

third party products or services.

The Clients are requested to specifically note that we will earning distribution commission on the investments made by its clients in all

third party products, as per the relevant rates applicable in case of the respective products.

Any information contained in this material shall not be deemed to constitute an advice, an offer to sell/purchase or as an invitation or

solicitation to do for security of any entity and further we shall not be liable for any loss, damage, liability whatsoever for any direct or

indirect loss arising from the use of this information. Recipients of this information should exercise due care and caution and read the offer

document of the product or service and also obtain further advice of the finance/other professionals, if so desired, prior to taking any

decision on the basis of this information.

We have not independently verified all the information and opinions given in this material. Accordingly, no representative or warranty,express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this material.

Suggestions and recommendations made in this material are based on the information provided by you and we shall not be liable for any

loss, damage, liability whatsoever for any direct or indirect loss arising from the use of these suggestions and recommendations made due

to wrong information provided.


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Thank You

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