Best positioned for Economic Recovery & Make in India initiative

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Louise Johnson
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1 HDFC INFRASTRUCTURE FUND (Open Ended Equity Scheme) Best positioned for Economic Recovery & Make in India initiative Ideally suited for SIP Refer slide no 13 This product is suitable for investors who are seeking*: Capital appreciation over long term Investment predominantly in equity and equity related securities of companies engaged in or expected to benefit from growth and development of infrastructure. to large sized companies High risk (BROWN) * Investors should consult their financial advisers if in doubt about whether the product is suitable for them. Note: Risk is 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 30 th January,

2 HDFC Infrastructure Fund One Fund, Two themes HDCF Infrastructure Fund is ideally positioned to benefit from : Infrastructure thrust in India Power Road Railways Make in India initiative Clear government focus Land & Mining laws tweaked, Labour laws changes likely Localisation of Defence procurement Softening of interest rates to benefit manufacturing & capex sectors 2

3 Infrastructure Several positive developments in Power, Roads & Railways Power Target 24x7 Power for all by 2019 Coal mining through auctions. Target to double coal production by 2019 Power generation output to double by 2019 by addressing fuel and transmission network constraints Approved Rs 720 bn spending over next five years on T&D Roads Target 30 km per day 4000 km EPC projects to be awarded in FY15 Premium restructuring approved for stalled BOT projects Started rebidding of surrendered BOT projects Railways - Increased passenger fares by 14% after 16 years 100% FDI in certain areas Focus on modernization & upgradation of Railways $19 bn worth Metro projects to be awarded during FY15-17 Rs 1 lakh-crore orders soon for power, mining equipment Power Minister * Source: Publicly available information, *Economic Times Article dated 10 th January,

4 Infrastructure sector Improving policy framework Effective leadership in Power, Transport, Railways and Defence ministries Coal mines auction process commenced; Telecom spectrum auction announced Cabinet hikes FDI limit from 26% to 49% in insurance and defence Cabinet clears Digital India programme Mining issues resolved through MMDR Amendment Ordinance 2015 Easing norms and online approvals for Environment & Forest clearances Projects below Rs 10 bn do not require CCEA approval now MOU between Road and Railway minister for faster clearances Funding: Flexible Structuring of Long Term Project Loans to Infrastructure and Core Industries RBI permits use of 5-25 rule for loan restructuring of existing projects as well Source: Publicly available information 4

5 Make in India Initiative The features : Clear government focus Land & Mining laws tweaked, Labour law changes likely, Mining laws amended Focus on localization of Defence procurement Simplification of rules Goal to be among top 50 countries in Ease of Doing Business ranking GST should lead to tax simplification, unifying market The India Advantage : The country is expected to rank amongst the world s top three growth economies and amongst the top three manufacturing destinations by 2020 Favorable demographic dividends for the next 2-3 decades. Sustained availability of quality workforce The cost of manpower is relatively low as compared to other countries Strong technical and engineering capabilities backed by top-notch scientific and technical institutes Source: Publically available information 5

6 Infrastructure & Manufacturing Closely linked to each other Improving Infrastructure supports manufacturing and vice versa HDFC Infrastructure Fund invests in the entire ecosystem 6

The Defence opportunity Large opportunity available for domestic players DPP 2013 emphasizes local sourcing FDI increased to 49% and delicensing of manufacturing India is likely to award projects

7 The Defence opportunity Large opportunity available for domestic players DPP 2013 emphasizes local sourcing FDI increased to 49% and delicensing of manufacturing India is likely to award projects worth USD 50bn over next five years. DPP 2013: Priority of sourcing arrangement Buy (Indian) Buy & Make (Indian) Make Buy & Make with ToT Buy Global USD 19bn worth projects cleared in last 6 months 6 submarines likely to be made in India Purchase of Artillery Guns cleared after 15 years Transport aircraft (Avro) replacement program Source: BAML and Edelweiss 7 7

8 Increasing competitiveness of India vs China China is 9.5% & India is 1.6% of global exports INR has depreciated by ~43% in last 5 years Wage inflation in China is higher than in India % increase in productivity adjusted labour costs (China Productivity adjusted manufacturing wages (US$) % CY 2004 CY 2014 Increasing wage inflation in China, is beneficial for India Source: Bloomberg, Kotak 8

9 India : Probably the best placed economy in the world Best demographics Very low penetration of durables(car) Major beneficiary of oil fall Deflation not a concern One of the few with peak rates Source: Kotak, Bloomberg, JP Morgan, UN Comtrade, World Economic Outlook, PPAC, Interest rate is 10 Year GSec as on 29 th Jan,

10 Equity Markets : A positive outlook Reasonable P/E s * despite markets * * run up EBITDA margins at cyclical lows * % ** Source : CLSA FY Source : BAML Reasonable P/E s at cyclically low margins leads to positive outlook for equities Reference made to S&P BSE SENSEX in this presentation is only for easy understanding of market movement and must not be construed as future performance of S&P BSE SENSEX. The Benchmark for this FUND is CNX

11 Rapidly falling inflation & 3% Real rates indicate lower interest rates Inflation drivers are moderating Real Rates +ve after 4 years supportive of lower yields* Past High commodity prices INR depreciation Strong Consumer demand High wage inflation High increase in MSP's Sharply rising Diesel prices Future Lower/Stable Commodity prices Stable INR Slowdown in Consumer demand Moderation in wage growth Low growth in MSP's Stable prices Companies engaged in manufacturing & capex likely to benefit from lower rates Source: Bloomberg, BAML *HDFC Mutual Fund/AMC is not guaranteeing/offering/communicating any indicative yields or guaranteed returns on investments made in this scheme 11

12 HDFC Infrastructure Fund: A play on infrastructure & manufacturing 95% of assets of HDFC Infrastructure Fund are in Infra, manufacturing and related sectors Positioned for revival in Infrastructure & manufacturing sectors *Based on internal computation and classification. For detailed monthly portfolio as on December 31, 2014 please visit our website 12

13 SIP in HDFC Infrastructure Fund Key advantages An open ended Fund with a 6 year track record & well defined portfolio strategy This Fund has higher volatility (Beta of 1.8) due to higher exposure to related sectors * While the Fund offers a good risk reward proposition in the medium to long term, short term volatility is high Investing through SIP reduces short term volatility SIP is thus an ideal way to invest in HDFC Infrastructure Fund * This data is as on

14 HDFC Infrastructure Fund Favorable Risk Reward Proposition RISK Portfolio is concentrated in a few sectors, hence carries higher risk In view of the higher risk, exposure to this Fund should be controlled* Not suitable for Risk averse investors Risk Reward Proposition With attractive valuations and prospects of economic recovery, we feel risk reward is favorable for the scheme* * In view of the individual circumstances and risk profile, each investor is advised to consult his / her professional advisor before making a decision to invest., 14

Scheme Performance Summary Past performance may or may not be sustained in the future. Returns greater than 1 year period are compounded annualised (CAGR). The above returns are of growth option.

15 Scheme Performance Summary Past performance may or may not be sustained in the future. Returns greater than 1 year period are compounded annualised (CAGR). The above returns are of growth option. #The Scheme is co-managed by Prashant Jain and Srinivas Rao Ravuri. +The Scheme is co-managed by Prashant Jain(Equities) and Shobhit performance may not strictly be comparable with that of its Additional Benchmark in view of balanced nature of the scheme where a portion of scheme's investments are made in debt instruments. 1. Benchmark 2. Additional Benchmark 15

16 Product Features Type of Scheme Investment Objective Plans/Options Application Amount (Under Each Plan/Option) Entry / Exit Load* An Open Ended Equity Scheme To seek long term capital appreciation by investing predominantly in equity and equity related securities of companies engaged in or expected to benefit from the growth and development of infrastructure The plans viz. HDFC Infrastructure Fund and HDFC Infrastructure Fund Direct Plan offers investors following options: Growth Option Dividend Option with payout and re-investment facility Minimum Rs. 5,000/- and any amount thereafter. Additional Purchase : Rs 1000/- and any amount thereafter Entry Load: Not Applicable. Upfront commission shall be paid directly by the investor to the ARN Holder (AMFI registered Distributor) based on the investors' assessment of various factors including the service rendered by the ARN Holder. Benchmark Index CNX 500 Exit Load: In respect of each purchase / switch - in of units, an exit load of 1.00% is payable if units are redeemed / switched - out within 1 year from the date of allotment. No exit load is payable if units are redeemed / switched - out after 1 year from the date of allotment. Additional Benchmark Index CNX NIFTY *For further details, refer SID and KIM available on and at ISC s of HDFC Mutual Fund Refer Disclaimer / Risk Factors on Slide 19 16

17 Asset Allocation Pattern Under normal circumstances, the asset allocation of the scheme s portfolio will be as follows: Type of Instruments Minimum Allocation Maximum Allocation Risk Profile of the (% of Net Assets) (% of Net Assets) Instrument Equity and Equity Related Instruments of infrastructure / infrastructure related companies Equity and Equity Related Instruments of companies other than mentioned above Medium to High 0 35 Medium to High Debt Securities and Money Market Instruments* and Fixed Income Derivatives 0 35 Low to Medium *Investment in securitized debt shall not normally exceed 30% of the net assets of the scheme. Exposure to Derivatives <= 20% of the net assets Exposure to Foreign Securities: <= 35% of the net assets *For further details, refer SID and KIM available on or at ISC s of HDFC Mutual Fund Refer Disclaimer / Risk Factors on Slide

18 Glossary SID Scheme Information Document KIM Key Information Memorandum ISC s Investor Service Centres T&D Transmission and Distribution BoT Build Operate Transfer MMDR Mining and Minerals Development & Regulation CCEA Cabinet Committee on Economic Affairs 18

19 DISCLAIMER / RISK FACTORS The views expressed herein are based on the basis of internal data, publicly available information and other sources believed to be reliable. Any calculations made are approximations, meant as guidelines only, which you must confirm before relying on them. The information contained in this document is for general purposes only and is not an offer to sell or a solicitation to buy/sell any mutual fund units/securities. The document is given in summary form and does not purport to be complete. The document does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. The information/ data herein alone are not sufficient and should not be used for the development or implementation of an investment strategy. The same should not be construed as investment advice to any party. The statements contained herein are based on our current views and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Neither HDFC Asset Management Company (HDFC AMC) and HDFC Mutual Fund (the Fund) nor any person connected with them, accepts any liability arising from the use of this document. The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be fully responsible / liable for any decision taken on the basis of information contained herein. MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY

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HDFC Equity Fund (Open ended Growth Scheme)

HDFC Equity Fund (Open ended Growth Scheme) Performing consistently^ over two decades and several market cycles ^ The Fund has outperformed benchmark in 18 out of 20 years of existence This product is