Equity Update August 2018

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Piers Chapman
5 years ago
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1 Market Overview (as on July 31, 2018) Flows July-18 June-18 May-18 FIIs (Net Purchases / Sales) (Rs cr) MFs (Net Purchases / Sales) (Rs cr) Domestic Markets Macro Indicators GDP (YoY%) IIP (YoY%) Crude ($ bbl) Core Sector Growth (YoY%) Trade Deficit ($ mn) 1429 (2577) (9660) 5, July-18 (%) Latest Update 7.7 (4QFY18) 3.2 (May) 72.4 (July 31) 6.7 (June) (16,600) (June) (13.1) (4QFY18) 22.0 Current PE 10 Yr Average S&P BSE Sensex Nifty S&P BSE Auto S&P BSE Bankex S&P BSE Capital Goods S&P BSE Consumer Durables S&P BSE FMCG S&P BSE Healthcare S&P BSE IT S&P BSE Oil & Gas S&P BSE PSU S&P BSE Realty S&P BSE Small Cap S&P BSE Teck Index Global Markets July-18 Current 10 Yr. (%) PE Avg. US UK Japan Hong Kong (1.3) Singapore China (0.4) Earnings Growth (%) FY18E FY19E FY20E Sensex Previous Update 7.0 (3QFY18) 4.8 (April) 77.6 (June 29) 4.7 (April) (14618) (May) (13.7) Current Account Deficit ($ bn) (3QFY18) FII Holding in Indian 22.0 Equities (%) # (4QFY18) (3QFY18) Note: # FII hldg includes ADR/GDR (BSE500 Index); Data Source: Crisil Research; * Data till 20 th July, 2018; CAD:Current Account Deficit; GDP: Gross Domestic Product, IIP: FII: Foreign Institutional Investors; MF-Mutual Fund Global Market Update US Economy: The US economy surged 4.1% in the second quarter of 2018, recording its fastest pace of growth since Growth came on the back of rising consumer spending, exports and business investments, and after US President Donald Trump cut taxes earlier in the year. European Union: The Eurozone s GDP grew at an annualised rate of 1.4% in Q2 2018, down from 1.5% in the first quarter. The economy lost momentum as exports dipped and concerns on trade tensions. Meanwhile, the European Central Bank (ECB) kept its key interest rate at a record low of 0% for its main borrowing rate. It also reaffirmed that it will end its 2.6 trillion euros stimulus programme this year. Japan: The Bank of Japan kept its monetary policy steady by maintaining its short-term interest rate target at minus 0.1% and its 10-year government bond yield target at 0%. Emerging Markets: China posted second-quarter GDP growth of 6.7% from a year ago compared with 6.8% in the first quarter. The International Monetary Fund (IMF) stated that China s economy continues to perform strongly and maintained its earlier forecast on the country s GDP growth at 6.6% for this year. Source: CRISIL Research Indian Market Update Index Performance: Indian equity indices recorded stellar performance in July 2018 with benchmarks S&P BSE Sensex and Nifty 50 touching new highs of 37,607 and 11,357 points, respectively and surging 6% each. Domestic Developments: Rally in index, reduction in the Goods and Services Tax (GST) rates on more than 50 items. Progress of the monsoon and hike in minimum support price (MSP) for kharif crops by the government boosted sentiments. Ease of domestic political jitters after the government won trust vote in the Parliament, intermittent gains in the rupee against the greenback, and domestic and foreign inflows augured well for the local indices. Global Developments: The market was also buoyed by positive global developments, including fall in global crude oil prices and easing of trade tensions between US and EU after the former refrained from imposing tariffs on cars from the EU. Further gains were capped as investors remained cautious ahead of the policy meetings of the RBI, Bank of Japan and US Fed. Worries about impact of a global trade war between US-China on the global economic growth also dented sentiments. Sectoral Impact: S&P BSE Oil & Gas was the topmost sectoral gainer up nearly 10%. FMCG shares rose owing to the GST Council s decision to slash tax rates on several key items; S&P BSE FMCG jumped 7.13%. S&P BSE BANKEX index rose 6.00% owing to corporate earnings by some of the banks and after government unveiled the SASHAKT programme, which proposes to set up independent asset management companies (AMCs) and steering committees for faster resolution of bad loans in the banking system. S&P BSE Metal was the biggest sectoral decliner down around 3.10%. Source: NSE, BSE; Crisil Research

2 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Equity Update Market Outlook and Triggers Easing crude oil prices, stabilizing INR, GST Council s rate-cut announcement, and decent 1QFY19 results pushed markets up by 6% in July The defeat of the no-confidence motion against the incumbent government also aided sentiment. Mid and smallcaps, after rebounding from YTD lows during the month, were up 4% but continue to underperform the broader markets. Further, the government stepped up fiscal stimulus via an increase in Minimum Support Price (MSP) for the summer crops and cut in GST rates for 88 items in the consumer goods segment - the bulk of which were reduced from 28% to 18%. These should help growth in the ensuing months and could be positive for the consumption theme, provided inflation remains under control. We continue to believe that markets are likely to remain volatile over the next 12 months, owing to both domestic and global developments. Some of the key risks to watch out are higher global interest rates, volatility in crude oil price, and the Government s commitment towards fiscal discipline in the run-up to the 2019 elections. Even post the correction, we believe mid and smallcap valuations continue to remain expensive. Also, there could be room for further correction in select companies in these segments. Therefore, we continue to prefer largecaps based on valuations and the conviction that the formalisation of the economy could help larger companies increase their market share. However, investors who have a longer horizon with an appetite for volatility may consider doing systematic/staggered investments in mid and smallcaps. Additionally, we remain sanguine on export-oriented ideas owing to their reasonable valuations and due to select macroeconomic factors such as rupee depreciation, CAD worsening etc., which could turn favourable for this theme. We continue to recommend investing in asset allocation schemes or conservative hybrid schemes which can benefit out of volatility. For those investors who are looking at pure equity exposure, we recommend large-cap oriented schemes. Equity Valuation Index Equity valuations show that the market valuations are in the zone where investors are recommended to invest in asset allocation schemes Book Partial Profits Stay Invested RSF/ESF/BAF Multi-Asset/E&DF Multicap Schemes Midcap Schemes Equity valuation index is calculated by assigning equal weights to Price to equity (PE), Price to book (PB), G-Sec*PE and Market Cap to Gross Domestic Product (GDP) RSF ICICI Prudential Regular Savings Fund, ESF ICICI Prudential Equity Savings Fund; BAF ICICI Prudential Balanced Advantage Fund; Multi- Asset ICICI Prudential Multi-Asset Fund; E&DF ICICI Prudential Equity & Debt Fund None of the aforesaid recommendations are based on any assumptions. These are purely for reference and the investors are requested to consult their financial advisors before investing.

3 Our Recommendations Investors may continue with their investments in pure equity schemes. As uncertainty regarding global events and run-up to elections cannot be ruled out, we believe the markets could be volatile in the near term. Hence for new investors we recommend investing in asset allocation schemes. Investors looking for long-term exposure with an appetite for volatility could consider investing systematically in small and midcap schemes. Investors looking for tactical allocation could invest in thematic schemes encompassing export and services and Pharma sectors. Our Recommendations Equity Schemes Pure Equity Schemes ICICI Prudential Bluechip Fund (An open ended equity scheme predominantly investing in large cap stocks) ICICI Prudential Large & Mid Cap Fund (An open ended equity scheme investing in both large cap and mid cap stocks) ICICI Prudential Multicap Fund (An open ended equity scheme investing across large cap, mid cap and small cap stocks) These Schemes aim to generate capital appreciation through participation in equities. Long-Term SIP Schemes ICICI Prudential Value Discovery Fund (An open ended equity scheme following a value investment strategy) ICICI Prudential Smallcap Fund (An open ended equity scheme predominantly investing in small cap stocks) ICICI Prudential Midcap Fund (An open ended equity scheme predominantly investing in mid cap stocks) These schemes aim to generate long term wealth creation over a full market cycle. Asset Allocation Schemes ICICI Prudential Balanced Advantage Fund (An open ended dynamic asset allocation fund) ICICI Prudential Equity & Debt Fund (An open ended hybrid scheme investing predominantly in equity and equity related instruments) ICICI Prudential Multi-Asset Fund (An open ended scheme investing in Equity, Debt, Gold/Gold ETF/units of REITs & InvITs and such other asset classes as may be permitted from time to time) ICICI Prudential Equity Savings Fund (An open ended scheme investing in equity, arbitrage and debt) ICICI Prudential Regular Savings Fund (An open ended hybrid scheme investing predominantly in debt instruments) These schemes aim to benefit from volatility and can be suitable for investors aiming to participate in equities with low volatility. Thematic/Sectoral schemes ICICI Prudential Exports and Services Fund (An open ended equity scheme following Exports & Services theme) ICICI Prudential Pharma Healthcare and Diagnostics(P.H.D) Fund (An open ended equity scheme investing in Pharma, Healthcare, Diagnostic and allied Theme) Investors could invest in this thematic scheme for tactical allocation. It would be a high risk investment option.

Disclaimer & Riskometers ICICI Prudential Bluechip Fund is suitable for investors who are seeking*: Long term wealth creation An open ended equity scheme predominantly investing in large cap stocks.

4 Disclaimer & Riskometers ICICI Prudential Bluechip Fund is suitable for investors who are seeking*: Long term wealth creation An open ended equity scheme predominantly investing in large cap stocks. ICICI Prudential Large & Mid Cap Fund is suitable for investors who are seeking*: Long term wealth creation An open ended equity scheme investing in both largecap and mid cap stocks ICICI Prudential Value Discovery Fund is suitable for investors who are seeking*: Long term wealth creation An open ended equity scheme following a value investment strategy. ICICI Prudential Equity & Debt Fund is suitable for investors who are seeking*: Long term wealth creation solution A balanced fund aiming for long term capital appreciation and current income by investing in equity as well as fixed income securities. ICICI Prudential Balanced Advantage Fund is suitable for investors who are seeking*: Long term wealth creation solution An equity fund that aims for growth by investing in equity and derivatives. ICICI Prudential Multicap Fund is suitable for investors who are seeking*: Long term wealth creation An open ended equity scheme investing across largecap, mid cap and small cap stocks. ICICI Prudential Equity Savings Fund is suitable for investors who are seeking*: Long term wealth creation An Open ended scheme that seeks to generate regular income through investments in fixed income securities, arbitrage and other derivative strategies and aim for long term capital appreciation by investing in equity and equity related instruments.

5 ICICI Prudential Exports and Services Fund is suitable for investors who are seeking*: Long term wealth creation An open-ended equity scheme that aims for growth by predominantly investing in companies belonging to Exports & Services industry. ICICI Prudential Multi-Asset Fund is suitable for investors who are seeking*: Long term wealth creation An open ended scheme investing in at least three asset classes with minimum allocation of 10% to each asset class. ICICI Prudential Regular Savings Fund is suitable for investors who are seeking*: Medium to Long term regular income solution A hybrid fund that aims to generate regular income through investments primarily in debt and money market instruments and long term capital appreciation by investing a portion in equity. ICICI Prudential Pharma Healthcare and Diagnostics(P.H.D) Fund is suitable for investors who are seeking*: Long term wealth creation An equity scheme that predominantly invests in pharma, healthcare, hospitals, diagnostics, wellness and allied companies. ICICI Prudential Midcap Fund is suitable for investors who are seeking*: Long term wealth creation An open-ended equity scheme that aims for capital appreciation by investing in diversified mid cap companies. ICICI Prudential Smallcap Fund is suitable for investors who are seeking*: Long term wealth creation An open ended equity scheme that seeks to generate capital appreciation by predominantly investing in equity and equity related securities of small cap companies. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. In the preparation of the material contained in this document, the AMC has used information that is publicly available, including information developed in-house. Information gathered and material used in this document is believed to be from reliable sources. The Fund however does not warrant the accuracy, reasonableness and/or completeness of any information. For data reference to any third party in this material no such party will assume any liability for the same. All recipients of this material should before dealing and or transacting in any of the products referred to in this material make their own investigation, seek appropriate professional advice and carefully read the scheme information document. We have included statements 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 monitory and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in India and globally, changes in domestic and foreign laws, regulations and taxes and changes in competition in the industry. All data/information used in the preparation of this material is dated and may or may not be relevant any time after the issuance of this material. The AMC takes no responsibility of updating any

6 data/information in this material from time to time. he AMC (including its affiliates), the Fund 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. The recipient alone shall be fully responsible/are liable for any decision taken on the basis of this material.

Equity Update October 2018

Equity Update October 2018 Market Overview (as on September 28, 2018) Flows Sept-18 Aug-18 July-18 FIIs (Net Purchases / Sales) (Rs cr) MFs (Net Purchases / Sales) (Rs cr) Domestic Markets Macro Indicators GDP (YoY%) IIP (YoY%)