Equity: Buy on dips. Build portfolio for long term wealth creation Fixed Income: Invest in short to medium duration funds

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1 Equity: Buy on dips. Build portfolio for long term wealth creation Fixed Income: Invest in short to medium duration funds

2 1 Month Returns' (%) Global Indices Among the emerging countries India outperformed followed by Japan and Germany two developed countries. Meanwhile, the commodity driven countries saw their benchmark index closing negative Germany - DAX Index; China - SSE Composite Index; France - CAC 40 Index; Japan - Nikkei; Europe - Euronext 100; Hong Kong - HangSeng; US - Dow Jones; Singapore - Strait Times; Russia - RTS Index; Indonesia - Jakarta Composite Index; U.K. FTSE; South Korea - Kospi; Brazil - Ibovespa Sao Paulo Index; India S&P BSE Sensex; Data as of May 31, 2016

3 1 Month Returns' (%) Sectoral Performance Month S&P BSE Capital Goods was the best performing index on account of government s support to Make in India initiative by bringing National Policy on Capital Goods. Large-cap index outperformed the mid and small cap based indices. 1 Month (%) S&P BSE SENSEX 4.02 S&P BSE MID CAP 2.83 S&P BSE SMALL CAP 1.07 All indexes are of S&P BSE; Bankex - S&P BSE Bank; CD - S&P BSE Consumer Durables; CG - S&P BSE Capital Goods; FMCG - S&P BSE Fast Moving Consumer Goods; HealthCare - S&P BSE Health Care; Infra. - S&P BSE India Infrastructure; IT - S&P BSE Information Technology Source: MFI; Data as of May 31, 2016

4 India has outperformed EM & World India Outperforming India Emerging Markets World Source: Bloomberg. Returns in USD; EM Emerging Market

5 FII Overweight on India OW UW AEJ funds (US$70 bn) Country India is overweight across different funds investing in EM OW/UW allocation (in bp) EM funds (US$215 bn) Country OW/UW allocation (in bp) Overall MFs globally (~US$1.1 tn) OW/UW Country allocation (in bp) India 580 India 345 India 70 Hong Kong 265 Hong Kong 185 Hong Kong 65 Thailand 190 Thailand 50 Singapore 15 Singapore 155 Philippines 25 Thailand 15 Philippines 85 Singapore 10 Philippines 0 Indonesia -45 Indonesia 5 Indonesia -20 Taiwan -130 Malaysia -75 Malaysia -60 Malaysia -310 Taiwan -100 Taiwan -90 China -525 China -350 China -220 Korea -715 Korea -690 Korea -230 Source: Goldman Sachs; Data as on March 2016; OW-Overweight; UW-Under weight; MF Mutual Funds; EM Emerging Market; bps Basis Points; AEJ Asia Excluding Japan; EM Emerging Market

6 In rupees crore Flows Confidence of domestic investors can be seen in higher investment from domestic Mutual Fund companies to the equity market. Meanwhile FII flows to the Indian market has been subdued against previous month, although going forward the FII participation to India market is expected to grow. 25,000 20,000 15,000 10,000 5, ,000-10,000-15,000-20,000 Dom MF FII - Equity Investment Source: ACEMF; MF Mutual Fund; FII Foreign Institutional Investor

7 GDP Growth India in a favourable spot There was a positive surprise against global expectation as the quarterly GDP growth accelerated to 7.9% for Q1CY16. India has good quarterly growth expectation as per the Bloomberg consensus estimate. Country Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Brazil (YoY%) Hong Kong (YoY%) India (YoY%) Indonesia (YoY%) Malaysia (YoY%) Peru (YoY%) Philippines (YoY%) Russia (YoY%) Singapore (YoY%) South Africa (YoY%) Taiwan (YoY%) Source: Bloomberg; Data as of May 31, 2016; GDP Growth Quarterly (actual/forecasts); CY Calendar Year; GDP Gross Domestic Product

8 PE ratio Large-caps continues to remain better valued than mid-caps S&P BSE Midcap 100 PE, Sensex PE, Jan 14 Mar 14 May 14 Jul 14 Sep 14 Nov 14 Jan 15 Mar 15 May 15 Jul 15 Sep 15 Nov 15 Jan 16 Mar 16 May 16 Data source: Bloomberg; PE Price to Earnings Ratio

9 Our View Higher GDP Growth rate, low inflation, fiscal deficit within reasonable limit and lower current account deficit is seen stabilizing the economy. Lower base, benign commodity prices, government policies along with increased capex could help earnings to improve going forward. In the near term we believe markets may remain volatile due to global events like Fed rate action and BREXIT referendum to be held on June 23, On domestic front the NPA situation in the banking system needs a close watch. We believe markets may generate a reasonable return over the next three years, however, returns may come in phases and it may be volatile owing to global headwinds. Hence, from a long-term perspective of three-year plus, investors could gradually keep investing to build overweight position in equities by end of BREXIT - Britain exit from EU; NPA - Non-Performing Asset; GDP Gross Domestic Product

10 Equity Valuation Index Book Profits/ Stay Invested Invest Systematically Composite Index, Invest in Equities Aggressively Invest in Equities 0.00 May-05 May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 May-15 May-16 Valuations index recommends to invest systematically in equities. Dynamic asset allocation funds could be most suitable for lump-sum investment at this point in time. Equity Valuation index is calculated by assigning equal weights to Price-to-Earnings (PE), Price-to-Book (PB), G-Sec*PE and Market Cap to GDP ratio. G-Sec Government Securities. GDP Gross Domestic Product

RECOMMENDATIONS - Equity Aggressive Investments ICICI Prudential Select Large

Prudential Focused Bluechip Equity Fund ICICI Prudential Value Discovery Fund

Prudential Balanced Fund Investors may invest in these funds to benefit from

various sectors and should be part of investor s core equity portfolio These

11 RECOMMENDATIONS - Equity Aggressive Investments ICICI Prudential Select Large Cap Fund ICICI Prudential Top 100 Fund Moderate-risk Investments ICICI Prudential Focused Bluechip Equity Fund ICICI Prudential Value Discovery Fund Conservative Investments ICICI Prudential Balanced Advantage Fund ICICI Prudential Balanced Fund Investors may invest in these funds to benefit from domestic and global cyclical uptick These funds are well diversified across various sectors and should be part of investor s core equity portfolio These funds may be suitable for conservative investors for long term wealth as these funds dynamically manage equity levels

12 Fixed Income: Invest in short to medium duration funds

13 Good monsoon to contain food inflation Good Monsoon IMD Forecasts 106% of LPA Skymet Forecasts 109% of LPA CPI Food Inflation CPI has approx. 47% weightage to food. Hence, lower food inflation affect decrease the overall CPI Lower inflation trigger for softening Yield With lower inflation, the RBI could push for further easing of interest rate and could trigger further fall in yields Data source: IMD website; Skymet Website; MOSPI; CPI Consumer Price Index; RBI Reserve Bank of India; LPA - Long Period Average

14 Nov-2013 Jan-2014 Mar-2014 May-2014 Jul-2014 Sep-2014 Nov-2014 Jan-2015 Mar-2015 May-2015 Jul-2015 Sep-2015 Nov-2015 Jan-2016 Mar-2016 May-2016 Higher credit spread The credit spread between AAA and AA corporate bonds has increased over the last few months. We believe the spread will narrow going forward. In this scenario, funds with accrual strategy will be a suitable investment avenue Credit Spread Data source: Bloomberg; Credit Spread is the difference between AAA and AA Corporate Bond Papers.

15 Credit rating cycle Recovery in commodity price & expected pick-up in earnings will help improve companies balance sheet Companies are also taking active measures to reduce debt by deleveraging i.e. moving out of noncore businesses The combined effect should result in overall improvement of credit quality resulting in upgrades in credit rating This cycle will benefit accrual funds

16 Scope for further fall in yields With the RBI taking steps to increase systematic liquidity and improve transmission of earlier rate cuts, there is further scope for yield to fall Yr GOI RBI Repo Rate Data source: Bloomberg; GoI Government of India; RBI Reserve Bank of India

17 Debt Valuation Index Debt Valuation Index Aggressively in High Duration High Duration Moderate Duration Low Duration Ultra Low Duration The debt valuation index is indicating a moderate duration stance and hence, we recommend incremental investments in short to medium duration funds Debt Valuation Index considers WPI and CPI over G-Sec Yield, Current Account Balance and Crude Oil Movement for calculation. Equal weights are assigned to each of these parameters for calculating the index. Data as on May 29, 2016; WPI Wholesale Price Index; CPI Consumer Price Index

18 Our View Yields will continue to fall as demand supply dynamics seems to be in favour. The OMO purchases by the RBI while adding liquidity is also leading to lowering the net supply of government bonds in the market. PSU banks have been the major participants in the OMOs to book treasury gains in their HTM (Hold To Maturity) portfolios. Hence, yields may benefit and witness fall led by additional demand from these PSU Banks. In the near term short term yields will fall on the back of easing liquidity conditions while long end of the curve will fall led by favourable demandsupply dynamics. We believe interest rates will continue downward movement as structurally lower inflation shall provide scope for further rate cuts. As per the IMD forecast if monsoons are normal it may lead to lower food inflation and provide further room for RBI to cut rates. OMO - Open market operation; RBI - Reserve Bank of India; PSU - Public Sector Unit; IMD - Indian Meteorological Department

Prudential Long Term Plan Funds that can

Dynamic Bond Fund ICICI Prudential Short

duration could give better risk-adjusted

Regular Income Fund (Income is not assured

19 Debt Funds Aggressive investors with 3 years of investment horizon: ICICI Prudential Long Term Plan Funds that can dynamically change duration strategy based on market condition Investors with moderate risk appetite: ICICI Prudential Dynamic Bond Fund ICICI Prudential Short Term Plan Funds with short to medium duration could give better risk-adjusted returns. Conservative investors seeking to earn from Accrual + Duration: ICICI Prudential Regular Savings Fund ICICI Prudential Corporate Bond Fund ICICI Prudential Regular Income Fund (Income is not assured and is subject to the availability of distributable surplus.) Accrual funds are better suited for conservative investors

20 Riskometers ICICI Prudential Select Large Cap Fund is suitable for investors who are seeking*: Long term wealth creation solution An equity fund that aims to generate capital appreciation by investing in equity or equity related securities of companies forming part of S&P BSE 100 Index. *Investors should consult their financial advisers if in doubt about whether the product is suitable for them ICICI Prudential Top 100 Fund is suitable for investors who are seeking*: Long term wealth creation solution An equity fund that aims to provide long term capital appreciation by predominantly investing in equity and equity related securities. *Investors should consult their financial advisers if in doubt about whether the product is suitable for them ICICI Prudential Balanced 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 *Investors should consult their financial advisers if in doubt about whether the product is suitable for them ICICI Prudential Focused Bluechip Equity Fund is suitable for investors who are seeking*: Long term wealth creation solution A focused large cap equity fund that aims for growth by investing in companies in the large cap category *Investors should consult their financial advisers if in doubt about whether the product is suitable for them

21 Riskometers ICICI Prudential Regular Income Fund (Income is not assured and is subject to availability of distributable surplus) is suitable for investors who are seeking*: Medium 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. *Investors should consult their financial advisers if in doubt about whether the product is suitable for them ICICI Prudential Short Term Plan is suitable for investors who are seeking*: Short term income generation and capital appreciation solution A Debt fund that aims to generate income by investing in a range of debt and money market instruments of various maturities. *Investors should consult their financial advisers if in doubt about whether the product is suitable for them ICICI Prudential Value Discovery Fund is suitable for investors who are seeking*: Long term wealth creation solution A diversified equity fund that aims to generate returns by investing in stocks with attractive valuations *Investors should consult their financial advisers if in doubt about whether the product is suitable for them 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. *Investors should consult their financial advisers if in doubt about whether the product is suitable for them

22 Riskometers ICICI Prudential Dynamic Bond Fund is suitable for investors who are seeking*: Medium term wealth creation solution A debt fund that invests in debt and money market instruments with a view to provide regular income and growth of capital. *Investors should consult their financial advisers if in doubt about whether the product is suitable for them ICICI Prudential Long Term Plan is suitable for investors who are seeking*: Medium term savings solution A Debt Fund that invests in debt and money market instruments with a view to maximise income while maintaining optimum balance of yield, safety and liquidity. *Investors should consult their financial advisers if in doubt about whether the product is suitable for them ICICI Prudential Corporate Bond Fund is suitable for investors who are seeking*: Long term savings solution A debt fund that invests in debt and money market instruments of various maturities with a view to maximise income while maintaining optimum balance of yield, safety and liquidity. *Investors should consult their financial advisers if in doubt about whether the product is suitable for them ICICI Prudential Regular Savings Fund for investors who are seeking*: Medium term savings solution A debt fund that aims to deliver consistent performance by investing in a basket of debt and money market instruments with a view to provide reasonable returns while maintaining optimum balance of safety, liquidity and yield. *Investors should consult their financial advisers if in doubt about whether the product is suitable for them

23 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 dated. 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.

Monthly Market Outlook December Equities Invest in Equities for the long-run Fixed Income The appeal remains intact

Monthly Market Outlook December 2015 Equities Invest in Equities for the long-run Fixed Income The appeal remains intact Returns' (%) Source: MFI; Date ending on November 30, 2015 Global Performance Countries