ICICI Prudential Asset Management Company Ltd. · NSE:ICICIAMC
ICICI Prudential Asset Management — Investor Presentation (March 2013)
35 slides from ICICI Prudential Asset Management's investor presentation, March 2013
Slide 1: Budget & Outlook
Budget & Outlook March 2013 Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Slide 2: Economic Backdrop
ECONOMIC BACKDROP High Fiscal Deficit High Current Account Deficit Moderating Inflation Low Growth
Slide 3: Other Considerations
OTHER CONSIDERATIONS Rating downgrade threat Populist Budget Apprehension Incentivising financial savings
Slide 4: Current Account Deficit Continues to Soar
CURRENT ACCOUNT DEFICIT (CAD) CONTINUES TO SOAR Source: Bloomberg, Sharekhan Research, RHS – Right Hand Side, GDP – Gross Domestic Product 4
Slide 5: Fiscal, Revenue and Primary Deficit Trend
FISCAL, REVENUE AND PRIMARY DEFICIT TREND (RS IN ’00 00 CRORE) Source: Bloomberg, g Sharekhan Research - FD - RD - PD 5
Slide 6: Growth Has Remained Sluggish
GROWTH HAS REMAINED SLUGGISH… Source: CEIC CEIC, Macquarie Research, Research March 2013 6
Slide 7: Inflation on a Decelerating Trend
INFLATION ON A DECELERATING TREND I fl ti rate Inflation t (yoy ( change h iin WPI) for f major j commodity dit groups (%) Source: Office of the Economic Advisor, Ministry of Commerce & Industry, yoy – Year on Year, WPI – Wholesale 7 Price Inflation
Slide 8: Union Budget FY 2013-14
Union Budget FY 2013-14
Slide 9: Positive Signals by Government
POSITIVE SIGNALS BY GOVERNMENT To control Current Account Deficit y Household sector attempted to be weaned away from gold through three measures y Rajiv Gandhi Equity Savings Scheme (RGESS) I Increase i applicability in li bili to individuals i di id l - Rs12 R 2 Lacs L income limit from Rs10 lacs
Slide 10: Positive Signals by Government
POSITIVE SIGNALS BY GOVERNMENT y To Boost Exports, Ministry of Commerce y To announce foreign trade policy changes next month for boosting exports of goods and sector y To incentivize investments y Investment allowance 15% of investment for minimum capex of Rs 1bn in FY14 and FY15 y Micro, Small and
Slide 11: Government Resists Populism
GOVERNMENT RESISTS POPULISM Compared C d 2009, 2009 Central C l government’s’ ffocus on social i l and rural spend is substantially lower Source: India Budget Estimates, CLSA Asia-Pacific Markets
Slide 12: Increased Taxation
INCREASED TAXATION y TDS of 1% on the value of immovable properties where transfer consideration exceeds INR5mn; agricultural land to b exempted be t d y Surcharge for corporate increased from 5% to 10% (companies above Rs100mn revenue) y Additional 10% surcharge on individuals with above Rs10mn inc
Slide 13: Other Positive Steps Introduced Recently
OTHER POSITIVE STEPS INTRODUCED RECENTLY y To contain gold imports, import duty on gold from 4% to 6% y Fuel Hikes y Diesel Di l prices i increased i d by b Rs0.5/litre R 0 5/li per month h (excluding VAT, other charges, diesel prices hiked byy Rs0.45/litre effective from January y 18) y Bulk users
Slide 14: Equity Market Outlook
Equity Market Outlook
Slide 15: Key Facets of Equity Investments
KEY FACETS OF EQUITY INVESTMENTS • Significantly better, government has Economics taken steps to increase taxation • Remains unchanged, positive for Sentiments equities • Post correction, valuations have Valuations moved to fair value zone • Crude < US$95/ barrel, Lower CAD, Triggers FII selling (Gl
Slide 16: Valuations
VALUATIONS Valuations levels of the Sensex based on earnings estimate of Rs.1370 (4 Quarter Forward)
Slide 17: Some Parts of the Market Are Expensive, Rest Attractive
SOME PARTS OF THE MARKET ARE EXPENSIVE REST ATTRACTIVE EXPENSIVE, Index PE PB CNX FMCG Index 32.51 11.4 CNX Pharma Index 31 45 31.45 5 02 5.02 CNX Bank Index 13.72 2.35 CNX Infra I f IIndex d 15 74 15.74 1 83 1.83 CNX Nifty 17.66 3.03 Source: www.nseindia.com, Data as on 28 February 2013, PE – Price
Slide 18: Retail Investors Under-Invested in Equities
RETAIL INVESTORS UNDER-INVESTED IN EQUITIES Source: IIFL
Slide 19: Maintaining Equity Allocation Is the Key
MAINTAINING EQUITY ALLOCATION IS THE KEY y Fear has proved to be a chronic liability for both the economy and the stock market since 2008 y Contrary to investor fear, Indian equities have paid off in 2012 y Significant resurrection of investor confidence is required i d
Slide 20: Maintaining Equity Allocation Is the Key
MAINTAINING EQUITY ALLOCATION IS THE KEY y Retail investors have been majorly under-weight equities during past few years y Need for a significant acceleration in flows to equity MFs to maintain proper asset allocation y Investing only in ‘Safety’ in fixed income assets and R l Estate Real E could l
Slide 21: Increased Taxation Lower Fiscal Deficit Lower Consumption
Increased Taxation Lower Fiscal Deficit Lower Consumption Lower Inflation Reduction in Interest Rates Investment Cycle Pick up
Slide 22: Equity Market Outlook
EQUITY MARKET OUTLOOK y Markets will likely remain volatile on account of political (pre election period) and economic reasons (pre-election y Budget announcements of increased taxation may act as catalysts for f reasonable returns from f equities in 2013
Slide 23: Product Recommendations
PRODUCT RECOMMENDATIONS y Volatility – Lump sum investments in y ICICI Prudential Dynamic y Plan y ICICI Prudential Equity – Volatility Advantage Fund y Investment in ICICI Prudential Discovery Fund y Investments through STP / SIP over next 12-18 months in our equity q yp products. y Invest in US Bl
Slide 24: Key Risks to Outlook
KEY RISKS TO OUTLOOK y Crude rising high y Bad Monsoon Year y Populist measures before Elections e.g y Loan Waivers y Large L S Subsidy b id Programmes P
Slide 25: Fixed Income Outlook
Fixed Income Outlook
Slide 26: RBI Reduces Rates in Line with Our View
RBI REDUCES RATES IN LINE WITH OUR VIEW Source: RBI, CRR - Cash Reserve Ratio %
Slide 27: Interest Rates Outlook
INTEREST RATES OUTLOOK Key Rates Current View B kR Bank Rate 8 75% 8.75% Repo Rate 7.75% Reverse Repo 6.75% MSF 8.75% CRR 4 00% 4.00% = SLR 23.00% = SLR – Statutory Liquidity Ratio, MSF – Marginal Standing Facility; View is short term and medium term.
Slide 28: Fixed Income Review
FIXED INCOME REVIEW y Fixed Income markets were initially disappointed by the Budget primarily on account of: y Higher than expected gross borrowing number (Around 6,29,008.84 Crs. than Rs. 5,90,000 Crs.)*. y Reasonable scope p for g government borrowing g to come down but expect it to happen over a
Slide 29: Fixed Income Outlook
FIXED INCOME OUTLOOK y Factors that will aid in market remaining supported: y No auction supply in March y Liquidity remains above RBI’s comfort zone y Likelihood of the RBI buying bonds via OMOs is high in the coming weeks y Expect Rs. 30,000 Crs. of OMO (Open Market Operations) purchase y The gove
Slide 30: 10 Year Benchmark Yield & Inflation
10 YEAR BENCHMARK YIELD & INFLATION yHighly unlikely that the 10 year will sustain at 7.85% - 7.90% y Within the next two to three monthsth expectt it to t drop d b 30-35 by 30 35 bps yExpect a 75 bps rate cut over next 6 months 30 Source: Bloomberg
Slide 31: Product Recommendations
PRODUCT RECOMMENDATIONS y We believe that current market scenario is likely to b benefit fit investments i t t in i duration d ti f d / Income funds I F d Fund with 12-18 months horizon y Investors can also seek to benefit from reasonable risk adjusted j returns from investments in y ICICI Prudentia
Slide 32: Call for Action
CALL FOR ACTION 1. NEED TO INVEST IN EQUITY 2 INVEST IN DURATION 2.
Slide 33: Quote of FM on Budget Day
QUOTE OF FM ON BUDGET DAY “No reason for gloom or pessimism. Of g countries of the world only the large y China and Indonesia growing faster than India in 2012-13. In 2013-14,, only y China projected to grow faster than India”. Source: India Union Budget Speech FY 2013-14
Slide 34: Disclaimer
DISCLAIMER Mutual Fund investments are subject to market risks, read all scheme related documents carefully. All figures g and other data g given in this document is as on 28 Feb 2013 unless stated otherwise. The same may y or mayy not be relevant at a future date. The AMC takes no responsibility of
Slide 35: Thank You
Thank You
ICICI Prudential Asset Management Company — Investor Presentation (March 2013) on 6ix