Monthly Market Outlook February 2014

8/10/2019 Monthly Market Outlook February 2014

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1

MONTHLY MARKET OUTLOOK

February 2014


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INVESTORS UNDER-OWN EQUITY

Source: AMFI, RBI

A CLEAR

POSITION

2


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Twin deficits narrowing

Inflation on a downward trajectory

Growth will likely revive in 2014Economics

Domestic investor remain underinvested in

equitiesFIIs (Foreign Institutional Investors) have been

selling in recent past a positiveSentiments

A tad below fair valueValuations

Election results Strong / stable govt.

Moderating of problems in Argentina, Turkey,South Africa, UK

Triggers

OUR FRAMEWORK TO INVESTING -

EQUITY

3


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RISKS TO GROWTH

A Weak Coalition Government

Adverse Event in China

4


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CURRENT ACCOUNT DEFICIT

5 Source: RBI

-

1

3

-

1

2

-

1

2

-6

2

-

1

5

-

1

8

-

1

9

-

2

7

-

1

0

-

2

1

-

3

7

-

1

1

-

2

7

-5

1

-80.00

-60.00

-40.00

-20.00

0.00

20.00

40.00

U

D

B

o

Merchandise Trade Invisibles Current Account Deficit

Current Account Deficit narrowed sharply to USD 5.17Bn or 1.2% ofGDP on the back of turnaround in exports and decline in gold imports


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TRADE DEFICIT MUCH LOWER

6Source: RBI

The December 2013 trade deficit for India came in at USD 10.1 billionversus USD 17.19 billion in the same month last year

-20.0

-12.2

-12.5

-10.6

-6.70

-10.6

-9.2

-10.1

24.7

23.7

25.5

26.2

27.5

27.2

24.6

26.3

44.7

35.9

38.0

36.8

34.2

37.8

33.8

36.4

-30.00

-20.00

-10.00

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13

B

Trade Deficit ($ Bn) Exports ($ Bn) Imports ($ Bn)


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INDEX OF INDUSTRIAL PRODUCTION (IIP)

7Source: Internal

Index of Industrial Production (IIP) in India plunges by 2.1% inNovember 2013

-1

-0.6

2.5

0.6

3.5

1.5

-2.5

-1.8

2.6

0.4

2

-1.6

-2.1

-10

-5

0

5

10

15

20

%

Manufacturing Capital Goods IIP


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WPI AND CPI INFLATION DECLINES

8

WPI and CPI Inflation came down to 6.2% and 9.9% in December2013 respectively majorly due to decline in vegetable prices

Source: RBI , WPI refers to Wholesale Price Index and CPI refers to Consumer Price Index

7.3%

7.3%

7.3%

5.7%

4.8%

4.6%

5.2% 5.9%

7.0%

7.1%

7.2%

7.5%

6.2%

10.6%

10.8%

10.9%

10.4%

9.4%

9.3%

9.9%

9.6%

9.5%

9.8%

10.2%

11.2%

9.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Y

o

Y

%

WPI CPI


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FII FLOWS IN INDIAN EQUITIES (US M)

9 Source: Deutsche Bank; Bloomberg Finance L.P.


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VALUATIONS BELOW LONG PERIOD

AVERAGE

10Source: Motilal Oswal Financial Services Limited (MOSL)

*


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IPRU VALUATION CHART

11Source: Internal

*

Valuations in the Fair Value Range


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BIG TRIGGER - ELECTION RESULTS?

AN

UNCLEAR

POSITION


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PRODUCT POSITIONING

13

*

R

U

N

DEFENSIVE MODERATE AGGRESSIVE

POSITIONING

BAF

FOCUSED

TOP 100

TOP 200

DISCOVERY

BALANCED

DYNAMIC

MIDCAP

INFRA

BANKING


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PRODUCT RECOMMENDATIONS

Invest when:

Growth is Low

Index of Industrial Production (IIP) is Low

Current Account Deficit is Low

FIIs are selling

None of the aforesaid recommendations are based on any assumptions. These are purely for

Reference and the Investors are requested to consult their financial advisers before investing.14

For capitalizing on run up due to

positive triggers

1. ICICI Prudential Banking & Financial Services Fund

2. ICICI Prudential Infrastructure Fund3. ICICI Prudential Midcap Fund

For capitalizing on valueopportunities

1. ICICI Prudential Discovery Fund

To play on volatility in equitymarkets

1. ICICI Prudential Balanced Advantage Fund2. ICICI Prudential Dynamic Plan3. ICICI Prudential Balanced Fund

For core equity 1. ICICI Prudential Focused Bluechip Equity Fund2. ICICI Prudential Top 100 Fund


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Fixed Income

17


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RBI SURPRISES G IN

18Source: RBI, CRR refers to Cash Reserve Ratio

7.00%

6.75%

9.00%8.00%

7.75% 8.75%

R

s

e

R

p

R

p

M

a

g

n

S

a

n

n

F

t

y

RBI in its Third Quarter Monetary Policy Review increased key policy

rates while keeping CRR and Liquidity Support unchanged


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REASONS FOR RBI MOVE

19Source: Internal

Inspite of vegetable prices moderating, CPI remains at elevated

levels

Core inflation remains above the comfort zone of RBI

RBI has implicitly accepted Urjit Patel panels recommendations

AFTER AFFECTS

Rupee snapped three day losing streak against greenback andgained around 58p

Yields were up by 10-20bps across maturities in Money Market

Bond market remained bearish as RBI raised key rates by 25bps


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FIXED INCOME ATTRACTIVE

OPPORTUNITY

As a fund house, we are positive on fixed income at thismoment because:

Fiscal Deficit We expect the government to meet fiscaldeficit target of 4.8% for FY14 led by sharp expenditurecuts and subsidy deferral

GrowthGrowth may have bottomed out, but interestrates trending downwards may provide a vital lift toconsumption and capital expenditure

Current Account Deficit Sharply falling trade deficitalong with steady software earnings would likely resultin much needed relief on the CAD in FY14


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FIXED INCOME ATTRACTIVE

OPPORTUNITY

Currency INR has stabilized and risks on currencyfront has subsided

Inflation With vegetable prices cooling off, expect

inflation to trend downwards

Bond Yields stand a better chance of trending lower in

coming months considering the overall macro situation


22/26

22

OUTLOOK

Short Term Rates: Likely to remain elevated on account of

seasonal liquidity pressures and government maintainingsurplus cash by curbing spends to achieve fiscal deficit

Long Term Rates: They can remain range bound in the nearterm and may trend downwards once inflation prints startsubsiding from current levels

Source: CEIC, Deutsche Bank

Short-term interest rate Long-term interest rate


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RECOMMENDATION

23

Duration Funds Reason

1-3 Months ICICI Prudential Ultra Short Term Plan May benefit fromvery short termrates peakingtowards financialyear end

6 to 12 Months ICICI Prudential Banking & PSU Debt Fund May benefit fromaccrual and capitalappreciation

15 Month & Above ICICI Prudential Regular Savings Fund Accrual incomewith aim to providereasonable returns

24 Months & Above ICICI Prudential Income Plan Potential capital

appreciation fromsoftening of yieldsat the longer end.


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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 7thFebruary 2014 unless stated otherwise. The same may or may not be relevant at afuture date. The AMC takes no responsibility of updating any data/information in this material from time to time. The information shall not bealtered 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 financialimplication 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 usedinformation that is publicly available, including information developed in-house. Some of the material used in the document may have beenobtained from members/persons other than the AMC and/or its affiliates and which may have been made available to the AMC and/or to itsaffiliates. Information gathered and material used in this document is believed to be from reliable sources. The AMC however does not warrantthe accuracy, reasonableness and / or completeness of any information. We have included statements / opinions / recommendations in thisdocument, which contain words, or phrases such as will, expect, should, believe and similar expressions or variations of suchexpressions, that are forwardlooking statements. Actual results may differ materially from those suggested by the forward looking statementsdue to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic andpolitical 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 liablefor any decision taken on this material.

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Thank You

Monthly Market Outlook February 2014

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