investment opportunities for 2014
TRANSCRIPT
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MANY OF 2013‟s MACRO ECONOMIC AND
GEOPOLITICAL ISSUES ARE NOW BEHIND US
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Europe Debt
Crisis
US – Fiscal
Cliff &
Taper
China‟s
Growth
Middle
East
Crisis
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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
OPPORTUNITIES - EQUITIES
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ELECTION RESULTS???
AN
UNCLEAR
POSITION
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INVESTORS UNDER-OWN EQUITY
Source: AMFI, RBI
A CLEAR
POSITION
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THEMES TO PLAY IN 2014
Balanced approach to investing – Maintain asset
allocation in equity
Mid & Small caps Funds
Infrastructure
Pick up in activity expected across infrastructure
sectors
Staying invested in international funds – Important
part of asset allocation
Fixed Income - Bullish on „Duration‟ & Accrual Funds
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HOW TO MAINTAIN ASSET ALLOCATION
Large Allocations ICICI Prudential Balanced
Advantage Fund
ICICI Prudential Dynamic Plan
ICICI Prudential Balanced Fund
ICICI Prudential Focused Bluechip
Equity Fund
Small Allocations ICICI Prudential Midcap Fund
ICICI Prudential Infrastructure Fund
ICICI Prudential Discovery Fund
ICICI Prudential Top 100 Fund
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TURNING POINTS - 2014 – WORST SEEMS TO
BE BEHIND US
Equity markets are giving investors an opportunity to get
on board
Falling trend in Gross Domestic Product (GDP) growth,
investment growth and corporate earnings growth can
reverse during 2014
Policy environment improvements since last 15 months can
start seeing its positive impact on 2014
Trade Deficit & Current Account Deficit continues to decline
With Reserve Bank of India (RBI) reserves/CAD* ratio
improving, INR trends should be more stable and capability
to handle taper worries is much better now
7 *Current Account Deficit
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Corporate earnings growth should react favourably to the
improving macro
Almost four years of high interest rates
Financial assets appear attractive against physical assets
Indian investors‟ equity exposure remains very low
TURNING POINTS - 2014 – WORST SEEMS TO
BE BEHIND US
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ELECTION OUTCOME – AN IMPORTANT
TRIGGER
A potential strong mandate in May‟14 elections will likely
lead to a decisive government
This could accelerate the process of economic recovery
The outcome of the elections can significantly impact market
sentiments either ways
This can alter the pace of the recovery process but recovery
in itself should not be doubted
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WHAT TO EXPECT FROM A STRONG / STABLE
GOVERNMENT?
Possible Actions Beneficiary / Comments
•Quick / bold decision
making
•Lower subsidies
•Farm productivity
enhancement
•Tourism promotion at
new locations
•Tax Reforms
• Infra and cap goods
sector
•Oil PSUs, fiscal
consolidation
•Lower inflation /
improved rural income
•Boost to smaller city
infrastructure
•VDIS* scheme, Lower
peak tax rates
Source: CLSA, *refers to Voluntary Disclosure of Income Scheme
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POLARIZATION IN MARKET
11 Source: NSE Index Values have been rebased to 10
6.00
8.00
10.00
12.00
14.00
16.00
S&P BSE FMCG S&P BSE IT S&P BSE MID CAP
S&P BSE Sensex S&P BSE SMALL CAP S&P BSE HC
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MARKET IS CHEAP VS GDP
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India Market Cap / GDP
Source: CLSA, Bloomberg, trailing four quarters GDP
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MARKET VALUATIONS AT AVERAGE LEVELS
13 Source: CLSA
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MID CAPS TRADING AT A LARGE DISCOUNT
TO THEIR LONG‐TERM AVERAGE PB
14 Source: NSE, IIFL Research
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RISKS TO GROWTH IN 2014
A weak coalition government
Risks of rate increases as RBI is gradually attaching
higher importance to Consumer Price Index (CPI)
Higher vegetable prices (up 60% Y-o-Y); have
started coming off
Government expenditure reduction will be a near-term
growth headwind
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INDIA – ONE OF MOST INTERESTING STORIES
Across Asia-Pacific as well as global emerging markets
Is at an early stage of evolution
Consumption
Urbanization
Infrastructure investment
Delivering improving Competitiveness across a number of
industries in addition to IT
Fibres
Petrochemicals
Generic pharmaceuticals
Non - traditional autos
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• CAD narrowing
• Trade deficit narrowing sharply
• Growth – can revive in 2014
Economics
• Domestic investor remain underinvested in
equities
• FIIs (Foreign Institutional Investors) are
positive
Sentiments
• Plenty of value seen across sectors and
stocks Valuations
• Election results – Strong / stable govt.
• Growth - Positive
• Crude per barrel > 118 US$ - Negative
• Drop in loan to deposit ratio - Positive
Triggers
*CAD – Current Account Deficit
OUR FRAMEWORK TO INVESTING - EQUITY
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EQUITY FUNDS – RISK REWARD MATRIX
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Fixed Income
2014
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OUR FRAMEWORK TO INVESTING – FIXED
INCOME
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OPPORTUNITIES
Macro indicators pronounce need for lower interest rates
Amidst low pace of tapering external risks may have
receded
Lower inflation itself may be enough to improve sentiments
in bond markets
The current scenario may mark DURATION and ACCRUAL an
attractive play for year 2014
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RECOMMENDED THEME FOR 2014
Theme: Duration Strategy
With current economy suggesting need for lower interest rates, it may be
appropriate time to be invested in duration funds.
Theme: Accrual Strategy
Current elevated level of yields are conducive for investing in funds which
predominantly aims to generate returns through accruals
Investment Period Fund
12 months & above ICICI Prudential Dynamic Bond Fund
24 months & above ICICI Prudential Income Plan
24 months & above ICICI Prudential Long Term Gilt Fund
Investment Period Fund
15 to 30 days ICICI Prudential Savings Fund
15 months & above ICICI Prudential Regular Savings Fund
30 months & above ICICI Prudential Corporate Bond Fund
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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
January 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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