an open ended equity scheme following business cycles ... · re 2 3 b/13 mar/13 r/13 3 3 3 g/13 3...
TRANSCRIPT
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An open ended equity scheme following business cycles based investing theme
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Phases of a Business Cycle
2
The chart is for illustrative purpose only
Ou
tp
ut
Capacity Growth
Trend Growth
Recession
Slump
Recovery
Time
-
How Business Cycle Actually Works
Ou
tp
ut
Time
Growth
Recession
Slump Recovery
Capacity
Growth
Trend
Macro Economic
conditions and the Fiscal &
Monetary Policy response
by the Govt. & Central Banks,
during an on-going Business
Cycle may extend or shorten a
Business Cycle basis
conditions prevailing at the
time. Such distortions often
provides appropriate
opportunities to invest
3 The chart is for illustrative purpose only
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Characteristics of Business Cycle Phases
GROWTH RECESSION SLUMP RECOVERY
Economic Conditions
• Capacity utilisation above
normal
• Output growth strong
• Corporate profitability also
peaks.
• Strong tax revenues
• Markets not focussing on risk
Appropriate Monetary
Policy Response:
Tightening/ Contractionary
Economic Conditions
• Capacity utilisation still
above normal but falling
• Output growth below trend
• Tax revenues moderating
Appropriate Monetary
Policy Response:
Moving from contractionary
to neutral
Economic Conditions
• Capacity utilization below
normal.
• Growth also below trend.
• Risk aversion very high.
• Demand weak
Appropriate Monetary
Policy Response:
Accommodative policy
Economic Conditions
• Growth – Picks Up
• Credit Growth – Improves
• Inflation – starts to increase
• Govt. tax collection –
starts picking up
Appropriate Monetary
Policy Response:
Move from accommodative to
neutral
4 The above list is illustrative and not exhaustive, there may be several other characteristics observed during each phase
-
How To Identify A Business Cycle? – Few Examples
Business Cycle in Growth Phase Business Cycle in Slump Phase
Consumers and businesses feel
confident
Factories run at full capacity across all shifts
Businesses plan expansion
Employees have multiple job offers, Salary
hikes
Consumers buy discretionary goods, plan
vacations (growth in tourism)
Consumers and businesses nervous.
Postponing spending
Factories have idle capacity. Not operating
all shifts
Businesses cutting cost and capex
Layoffs and Salary Freeze
Consumers opt for spending cut
5 The above list is illustrative and not exhaustive. Capex – Capital Expenditure. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not
have any future position in these stocks/sectors.
-
Impact of
BUSINESS CYCLES
on Sectors
6
-
Sector Impact – Business Cycle
Sector Performance across Business Cycle phases
SECTORS RECOVERY EXPANSION RECESSION SLUMP
Financials
Technology
Consumer Discretionary
Consumer Staples
Pharmaceuticals
Energy
Real Estate
Metals
Utilities
7
Green shade indicates good performance, Amber shade indicates neutral performance and Red shade indicates poor performance. The stocks/sectors mentioned in this slide do not constitute any recommendation and
ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors
-
Sector Impact – Business Cycle
SLUMP
ILLUSTRATION 1 – CEMENT INDUSTRY (CYCLICAL SECTOR)
Particulars Remarks
Cement bag capacity
(Daily) 100 units
Actual Demand (Daily) 40 units
Revenue (Daily) 40*100 =
Rs. 4,000
Fixed Cost (Daily) Rs. 1,000
Net Profit Rs. 3,000
GROWTH
Particulars Remarks
Cement bag capacity
(Daily) 100 units
Actual Demand (Daily) 90 units
Revenue (Daily) 90*100 =
Rs. 9,000
Fixed Cost (Daily) Rs. 1,000
Net Profit Rs. 8,000
• Capacity of Producing:
100 Cement Bags Daily
• Sales Value of Cement
Bag – INR 100
8
The above table is for illustrative purpose only. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these
stocks/sectors
-
Sector Impact – Business Cycle
RECOVERY / GROWTH PHASE
ILLUSTRATION 2 – BANKING (CYCLICAL SECTOR)
• Increased Capex by
companies
• Increased requirement for
raw materials, resources
etc. by companies
• Rise in income,
discretionary spending by
individuals, corporates
Pick up in Sentiments,
Demands, Credit. Banks
tend to do well
Strong GDP growth rate
High inflation
Rising interest rates
9 Capex – Capital Expenditure. The above explanation is for illustrative purpose only. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have
any future position in these stocks/sectors
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Sector Impact – Business Cycle
WHEN THE GOING GETS TOUGH (SLUMP)
ILLUSTRATION 3 – PHARMA & FMCG (DEFENSIVE SECTOR)
Hey, despite this pandemic I still need…
Medicines
Food to
survive
Medicines Food
10 The above explanation is for illustrative purpose only. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors
Defensive sectors like Pharma
& FMCG tend to do well even
when economy is in slump
-
BUSINESS CYCLE
Investing
11
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Business Cycle Investing – Akin To Driving
CONDITIONS WHEN DRIVING ON EXPRESSWAY
Broad & Smooth roads
Comfortable Journey
Less Travel Time
Efficient fuel consumption
CONDUCIVE FOR SPEED @ 80-100 KMPH
• Banks
• Infrastructure
• Real Estate
• Capitall Goods
CONDITIONS WHEN ECONOMY IS IN FULL SWING
Good Macros
Low interest rate environment
Good Demand
CONDUCIVE FOR INVESTMENT PORTFOLIO
TO ALIGN TOWARDS
12
The above explanation is for illustrative purpose only. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these
stocks/sectors. The asset allocation and investment strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the
Scheme.
-
Business Cycle Investing – Akin To Driving
CONDITIONS WHEN DRIVING ON A CITY HIGHWAY
Average roads
Less Comfortable Journey
More travel time due to traffic
Inefficient fuel consumption
CONDUCIVE FOR SPEED @ 40-60 KMPH
• Energy
• Metals
• Technology
CONDITIONS WHEN ECONOMY IS
IN MODERATE ZONE
Average Macros
Relatively high interest rate environment
Average Demand
CONDUCIVE FOR INVESTMENT PORTFOLIO
TO ALIGN TOWARDS
13
The above explanation is for illustrative purpose only. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these
stocks/sectors. The asset allocation and investment strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the
Scheme.
-
Business Cycle Investing – Akin To Driving
CONDITIONS WHEN DRIVING IN A VILLAGE
Narrow roads
Uncomfortable Journey
More Travel Time
High fuel consumption
CONDUCIVE FOR SPEED @ 10-30 KMPH
• Technology
• Pharmaceuticals
• Power
• Telecom
CONDITIONS WHEN ECONOMY IS
IN A RECESSIONARY ZONE
Poor Macros
Poor Growth prospects
Low Demand
CONDUCIVE FOR INVESTMENT PORTFOLIO
TO ALIGN TOWARDS
14
The above explanation is for illustrative purpose only. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these
stocks/sectors. The asset allocation and investment strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the
Scheme.
-
How is
BUSINESS CYCLE
INVESTING different?
15
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P/E – Price to Earnings, P/B – Price to Book
Windshield Mirror Vs. Rear View Mirror
WINDSHIELD MIRROR REAR VIEW MIRROR
Future earnings potential
AIMS TO FOCUS ON WAY FORWARD
Economic indicators Future market share growth
Future project pipeline Historical returns
AIMS TO FOCUS ON HISTORICAL DATA
Long term average PE + PB Track record of dividend yield
Category Flows
16
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BOTTOM-UP APPROACH ORIENTED FUND BUSINESS CYCLE ORIENTED FUND
(TOP-DOWN APPROACH)
BUSINESS CYCLE INVESTING – An Investment Style
Which Focuses on Macros
WAY FORWARD
• Economic indicators
• Future earnings potential
• Future market share
growth
• Future project pipeline
HISTORICAL DATA
• Long term average
PE + PB
• Historical returns
• Track record of
dividend yield
• Flows to that category
WAY FORWARD
• Economic indicators
• Policy response
• Growth
• Inflation
HISTORICAL DATA
17
Heavy
Light
Heavy
Light
• Management
track record
• Valuations
(P/E & P/B)
P/E – Price to Earnings, P/B – Price to Book
Weightage Weightage
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Historical Turning Points in
BUSINESS CYCLE
18
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Strong recovery in Domestic + Global Growth = Strong Recovery Phase
2003-2004: Turning Point
CONTRIBUTING FACTORS TO
DOMESTIC GROWTH
• Low Interest Rates, 10 year G-sec at 5%,
Current Account Surplus @ 2.3%, Low
Inflation ~ 3.5%, Currency valuations cheap
• Low Household & Corporate leverage
• Bank NPAs and resolution
• Cheap land and labor
Banking & Capital Goods performed well post 2003,
as the leveraging cycle, capex and infrastructure picked-up
19
408
100
846
0
200
400
600
800
Dec/0
3
Dec/0
4
Dec/0
5
Dec/0
6
Dec/0
7
Index
Valu
es R
e-based t
o 1
00
S&P BSE Bankex & Capital Goods
S&P BSE Bankex S&P BSE CG
Source: MFIE. NPA – Non Performing Assets. Time period for performance considered is from 31-Dec-03 to 31-Dec-07. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual
Fund may or may not have any future position in these stocks/sectors. Past performance may or may not sustain in future. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit
http://www.icraonline.com/legal/standard-disclaimer.html.
http://www.icraonline.com/legal/standard-disclaimer.htmlhttp://www.icraonline.com/legal/standard-disclaimer.htmlhttp://www.icraonline.com/legal/standard-disclaimer.html
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Slow Domestic Growth + Weak Global Growth = Slowdown/Recession Phase
2011-2012: Turning Point
CONTRIBUTING FACTORS TO
DOMESTIC GROWTH
• Weaker macro environment – Pro cyclically
High fiscal deficit, High Inflation, High Current
Account Deficit
• Expensive Currency
• High corporate leverage, neutral household
leverage
Pharmaceuticals & Technology performed well post 2012,
as INR depreciated & Current Account Deficit was high
20
127
100
160
90
110
130
150
170
Dec/1
2
Jan
/1
3
Feb/13
Mar/13
Apr/13
May/1
3
Jun
/1
3
Jul/
13
Au
g/13
Sep/1
3
Oct/13
Nov/13
Dec/1
3
Index
Valu
es are r
e-based t
o 1
00
Nifty Pharma & S&P BSE IT Index
Nifty Pharma S&P BSE IT
Source: MFIE. Time period for performance considered is from 31-Dec-12 to 31-Dec-13. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any
future position in these stocks/sectors. Past performance may or may not sustain in future. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit http://www.icraonline.com/legal/standard-
disclaimer.html.
http://www.icraonline.com/legal/standard-disclaimer.htmlhttp://www.icraonline.com/legal/standard-disclaimer.htmlhttp://www.icraonline.com/legal/standard-disclaimer.html
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Weak Domestic Growth + Strong Global Growth = Global Recovery / Domestic Slowdown Phase
2018: Turning Point
CONTRIBUTING FACTORS TO
DOMESTIC GROWTH
• Demonetization – a massive regulatory
tightening, however weaker policy response
to counter it including tight monetary
conditions
• Pro-cyclical regulatory environment – NBFCs
loan book expansion driving household
leverage in a weak income environment
• Low corporate leverage but low earnings
Pharmaceuticals & Technology performed well post
2018, due to strong Global Cycle
21
133
154
70
90
110
130
150
Dec/1
8
Mar/19
May/1
9
Au
g/19
Oct/19
Jan
/2
0
Mar/20
Jun
/2
0
Au
g/20
Nov/20
Index
Valu
es are r
e-based t
o 1
00
Nifty Pharma & S&P BSE IT Index
Nifty Pharma S&P BSE IT
Source: MFIE, NBFC – Non Banking Financial Company. Time period for performance considered is from 31-Dec-18 to 30-Nov-20. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential
Mutual Fund may or may not have any future position in these stocks/sectors. Past performance may or may not sustain in future. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit
http://www.icraonline.com/legal/standard-disclaimer.html.
http://www.icraonline.com/legal/standard-disclaimer.htmlhttp://www.icraonline.com/legal/standard-disclaimer.htmlhttp://www.icraonline.com/legal/standard-disclaimer.html
-
Why BUSINESS CYCLE
investing at this juncture –
Macroeconomic Factors are
going to be critical
22
-
Shift From High To Low Interest Rates
Over the last decade, Global Central Banks including India & US, have supported growth by maintaining a
low interest rate environment
Any change in the interest rate stance may trigger Business Cycle Phase change
23
8.0
4.0
3.5
4.5
5.5
6.5
7.5
8.5
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
India Repo Rate (%)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
US 3Y, 5Y, 10Y Treasury Yields (%)
USGG3YR Index USGG5YR Index USGG12M Index
Source: RBI, Edelweiss Research. Data as of Nov 30, 2020
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Shift In The Amount Of Fiscal Stimulus
Global Economies have expanded their balance sheets manifold in the last decade
thereby increasing liquidity.
Any change in the stance on quantum or a decline in stimulus may trigger Business Cycle phase change
24
15236
27405
15000
19000
23000
27000
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
US Treasury Public Debt Outstanding (USD Bn)
8.5
15.1
4.0
6.0
8.0
10.0
12.0
14.0
16.0
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
Global broad money supply growth
(US, Europe & China)
Source: Edelweiss Research. Data as of Nov 30, 2020
-
Shift In Volatility
Equity markets delivered decent returns in relatively less volatile period due to ample liquidity.
With limited room for rate cuts and fiscal stimulus going forward, Business Cycle Phase
may change with reversal in stance
25
-60%
-30%
0%
30%
60%
90%
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
2000-2009 Equity Market Returns
(Nifty 50 Index)
Avg. Returns:
21%
-30%
-10%
10%
30%
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
2010-2019 Equity Market Returns
(Nifty 50 Index)
Avg.
Returns:
10%
Source: MFIE. Past performance may or may not sustain in future. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit http://www.icraonline.com/legal/standard-disclaimer.html.
http://www.icraonline.com/legal/standard-disclaimer.htmlhttp://www.icraonline.com/legal/standard-disclaimer.htmlhttp://www.icraonline.com/legal/standard-disclaimer.html
-
Shift In Number of COVID Cases – Peak To Trough
Except for the US, COVID-19 Infection curve appears to be flattening. Vaccines have already been approved and
are being used in some countries. Business Cycle may change going forward with mass availability of COVID
vaccine & on-going development around COVID vaccine
26
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
200000
0
10000
20000
30000
40000
50000
60000
Day 1
Day 8
Day 1
5
Day 2
2
Day 2
9
Day 3
6
Day 4
3
Day 5
0
Day 5
7
Day 6
4
Day 7
1
Day 7
8
Day 8
5
Day 9
2
Day 9
9
Day 1
06
Day 1
13
Day 1
20
Day 1
27
Day 1
34
Day 1
41
Day 1
48
Day 1
55
Day 1
62
Day 1
69
Day 1
76
Day 1
83
Day 1
90
Day 1
97
Day 2
04
Day 2
11
Day 2
18
Day 2
25
Day 2
32
Day 2
39
Day 2
46
Day 2
53
Day 2
60
Day 2
67
Day 2
74
Day 2
81
Day 2
88
Day 2
95
Day 3
02
Day 3
09
Italy France Spain Iran Russia UK US - RHS India - RHS Brazil - RHS
Source: JM Financial. Data as of Nov 30, 2020
-
To Sum Up…
LAST DECADE
Scenario
Easy Monetary Policy + Interest Rate Cuts
=
led to Lower Volatility
NEXT DECADE
Scenario
Limited room for rate cut + Elevated Global equity valuations
=
May result in Volatility
Strategy
Positive for equities as an asset class and
long duration schemes
Strategy
1) Be nimble as the macro environment may change
2) Schemes which aim to move between sectors swiftly
3) Volatility may be high. Hence a portfolio capable of prudently
positioning between various sectors may be suitable
27
-
PRESENTING
ICICI Prudential
BUSINESS CYCLE FUND
28
-
Business Cycle Investing O
utput
Time
Invests across Marketcap
No capping / minimum requirements
Invests across Themes
No capping / limits towards a particular theme
Invests across Sectors
No capping / limits towards a particular sector
Top Down Approach of investing
Not a Value / Contra / Special Situation/
Growth style of investment
02
03
04
29
01
The asset allocation and investment strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.
-
About ICICI Prudential Business Cycle Fund
INVESTMENT
PHILOSOPHY
Aim to identify and invest in opportunities
across sectors/themes/market caps, based
on prevailing business cycle
INVESTMENT
PROCESS
• The Fund Manager & Analysts decide the
investment theme basis prevailing market cycle
• The Fund Management team identifies
opportunities in that particular sector
INVESTMENT
APPROACH
Pure top-down approach based on various
macro indicators – inflation, growth, deficit, etc.
INVESTMENT
UNIVERSE
Opportunities from Nifty 500 TRI universe
will be considered for investment
SECURITY
SELECTION
Post identifying sectors based on the
Business Cycle, aim to select stocks basis
various financial parameters
EVALUATION
Periodic/event based assessment of the
macro economic environment and subsequent
investment approach
30 The asset allocation and investment strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.
-
Robust Investment Process & Portfolio Construct
ICICI PRUDENTIAL
BUSINESS CYCLE FUND
Monitor macro indicators –
GLOBAL & DOMESTIC
Aims to identify Business
Cycle –
GLOBAL & DOMESTIC
Aims to identify suitable
Theme / Sectors
Meeting of the Fund
Managers & Analysts
Finalize
Theme/Sectors/Stocks
Aims to identify
stocks
31 The asset allocation and investment strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.
-
Below parameters are aimed at ascertaining the phase of Business Cycle
and subsequently an investment approach is devised
Parameters For Identifying Business Cycles
Capex – Capital Expenditure, DM – Developed Markets. The above list its not exhaustive and above mentioned indicative indicators are used to ascertain business cycle and the same may change based on the evolving environment. The
asset allocation and investment strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.
32
MACRO
PARAMETERS
• Current Account Deficit
• Interest Rates
• Fiscal Deficit
• Inflation
• Capex Investments • New Projects cleared, etc
• Purchasing Manager Index • Business Confidence Index
• Sales of various consumer discretionary products, etc.
• DM Growth Outlook
• DM Policy Outlook
• China Growth Outlook
• China Policy Stance
INVESTMENT
INDICATORS
BUSINESS &
CONSUMER
SENTIMENT
GLOBAL
FACTORS
• IIP Growth
• Credit Growth
-
Investment Approach – Themes
The investment approach
is then determined by
classifying investment
themes basis Global &
Domestic Growth and
Business Cycle
33
Glo
bal
Grow
th
Domestic Growth
Global Growth: Strong
Domestic Growth: Strong
Global Growth: Strong
Domestic Growth: Weak
Global Growth: Weak
Domestic Growth: Weak
Global Growth: Weak
Domestic Growth: Strong
BLUE SKY PIGGY BACKING
DARK CLOUD RIDER
-
BLUE SKY – STRONG GLOBAL GROWTH + STRONG DOMESTIC GROWTH
Investment Portfolio
GLOBAL
CYCLICALS
SECTORS TO LOOK OUT FOR
• Metals • Mining • Oil, etc.
GLOBAL CYCLICALS (Sectors to look out for)
DOMESTIC
CYCLICALS
SECTORS TO LOOK OUT FOR
• Consumer Durables
• Capital Goods
• Banking • Auto
• Infrastructure
DOMESTIC CYCLICALS (Sectors to look out for)
34
The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors. The asset allocation and investment strategy will be
as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.
-
DARK CLOUD –
WEAK GLOBAL GROWTH + WEAK DOMESTIC GROWTH
RIDER –
WEAK GLOBAL GROWTH + STRONG DOMESTIC GROWTH
Investment Portfolio
DOMESTIC DEFENSIVES (Sectors to look out for)
DOMESTIC
DEFENSIVES
SECTORS TO LOOK OUT FOR
DOMESTIC
CYCLICALS
SECTORS TO LOOK OUT FOR
• Consumer Durables
• Capital Goods
• Banking • Auto
• Infrastructure
• Telecom
• Utilities
• Power
• FMCG, etc.
DOMESTIC CYCLICALS (Sectors to look out for)
35
The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors. The asset allocation and investment strategy will be
as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.
-
Investment Portfolio
The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors. The asset allocation and investment
strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.
36
SECTORS TO LOOK OUT FOR
GLOBAL CYCLICALS
(Sectors to look out for)
• Metals
• Mining
• Oil, etc.
EXPORT
ORIENTED
SECTORS TO LOOK OUT FOR
EXPORT ORIENTED
(Sectors to look out for)
• IT
• Pharmaceuticals
• Auto Ancillaries, etc.
SECTORS TO LOOK OUT FOR
DEFENSIVES
(Sectors to look out for)
• Telecom
• FMCG
• Utilities, etc.
PIGGY BACKING – STRONG GLOBAL GROWTH + WEAK DOMESTIC GROWTH
DOMESTIC
DEFENSIVES GLOBAL
CYCLICALS
-
Alpha Generation Strategy
The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors. The asset allocation and investment
strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.
Dec/03
May/06
Oct/08
Mar/11
Aug/13
Jan/16
Ju
n/18
(2003-2004)
Global Outlook: Growth
Domestic Outlook: Recovery
Sectors that performed:
Banks & Capital Goods
(2008-2009)
Global Outlook:
Weak Growth
Domestic Outlook:
Strong Recovery
Sectors that
performed:
Banks & Auto
(2011-2012)
Global Outlook:
Weak Growth
Domestic Outlook:
Slowdown
Sectors that
performed:
Tech, Pharma, FMCG
(2013-2014)
Global Outlook: Neutral
Domestic Outlook: Recovery
Sectors that performed:
Banks & Auto
(2018-2020)
Global Outlook:
Strong Growth
Domestic
Outlook:
Recession
Sectors that
performed:
Tech, Pharma,
FMCG
BLUE SKY RIDER DARK
CLOUD
RIDER PIGGY
BACKING
Sep/20
37
-
Current Domestic
Macro Scenario
38
-
Repo Rates in India are at significantly low levels. Low capacity utilization numbers indicate that India has
excess capacity if demand picks up pace
Abundant Liquidity & Excess Capacity
39
8.0
4.0
3.5
4.5
5.5
6.5
7.5
8.5
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
India Repo Rate (%)
79.0
63.7
60.0
65.0
70.0
75.0
80.0
20
11
20
12
20
12
20
13
20
13
20
14
20
14
20
15
20
15
20
16
20
16
20
17
20
17
20
18
20
18
20
19
20
19
20
20
Capacity Utilization (%, 4QMA)
Source: Edelweiss Research, RBI. Data as of June 30, 2020.
-
Percentage of Cases Testing
Positive Have Dropped
Recovery Rate Has Improved Coupled with
Declining Death Rate
Subsiding COVID Cases
40
0%
2%
4%
6%
8%
10%
0
20
40
60
80
100
120
140
160
6-M
ar
13-A
pr
21-M
ay
28-J
un
5-A
ug
12-S
ep
20-O
ct
27-N
ov
% t
ested p
osit
ive
Cases in
Million
s
Cumulatived Tested % tested positive (RS)
-0.5%
0.5%
1.5%
2.5%
3.5%
4%
24%
44%
64%
84%
6-M
ar
13-A
pr
21-M
ay
28-J
un
5-A
ug
12-S
ep
20-O
ct
27-N
ov
Death
Rate
Reco
very R
ate
Recovery rate (recovered to gross cases)
Death rate (Deaths to gross cases) - RS
Source: Morgan Stanley Research. Data as of Nov 27, 2020. RS- Right Side denotes what Y axis stands for in the graph
-
Improving GDP Growth Rate Correction in Real Estate Prices
Economic Growth & Real Estate
41
7.0% 6.6% 5.8%
5.0% 4.5% 4.7% 3.1%
-23.9%
-7.5%
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
Q2 F
Y19
Q3 F
Y19
Q4 F
Y19
Q1 F
Y20
Q2 F
Y20
Q3 F
Y20
Q4 F
Y20
Q1 F
Y21
Q2 F
Y21
India GDP Data
2,618
2,292
1000
1500
2000
2500
Dec/17
May/1
8
Oct/18
Mar/19
Au
g/1
9
Jan
/20
Jun/2
0
Nov/20
S&P BSE Realty Index
Source: MFIE, NSO. Past performance may or may not sustain in future. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit http://www.icraonline.com/legal/standard-
disclaimer.html.
http://www.icraonline.com/legal/standard-disclaimer.htmlhttp://www.icraonline.com/legal/standard-disclaimer.htmlhttp://www.icraonline.com/legal/standard-disclaimer.html
-
Current Macro Economic Scenario
• Significant Monetary and Fiscal Stimulus has been delivered by Global economies in CY2020 in the
wake of COVID-19 crisis
• This was primarily to deal with growth slowdown resulting from COVID-19 led lockdowns
• Monetary Policy support from Global Central Banks is expected to continue
• With significant global liquidity, India among other emerging markets is expected to do well
• Indian Economy seems to be getting back on track with improvement in growth, better than anticipated
Q2FY21 results, earnings upgrades and subsiding COVID cases
• Since Domestic growth is expected to improve further given good liquidity and global growth is
expected to be neutral due to increase in second wave of COVID infections in select developed
economies and subdued earnings, we believe we are in the „Rider‟ Phase
• Hence, we believe, investment in Domestic Cyclicals like Corporate Banks, Capital Goods, Metals &
Infrastructure and Real Estate is expected to do well
42 The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors
-
Investment Portfolio – Current Business Cycle
Rider – Neutral Global Growth + Recovery in Domestic Growth
DOMESTIC
CYCLICALS
SECTORS TO LOOK OUT FOR
43
Metals are considered as Global Cyclicals. he stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors. The asset
allocation and investment strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.
METALS BANKING CAPITAL GOODS INFRASTRUCTURE
-
Our Experience In Macro Calls
YEAR CALL RATIONALE OUTCOME
2012-13 Invest in Global Funds Inflation and Current Account Deficit at
alarming levels
Launched ICICI Prudential US Bluechip Equity Fund and
gave a strong buy call on Exports and Services sector.
S&P 500 delivered 20% CAGR from Dec-12 to Dec-14
2013-14 Invest in Infrastructure,
Banking, Small & Midcap Funds
Strong Govt. Mandate, expectations of NPA
resolution, expectation of fall in interest rates
Launched ICICI Prudential Value Fund - Series. S&P
BSE Midcap TRI & S&P BSE Smallcap TRI delivered
31% & 36% CAGR respectively from Dec-13 to Dec-15
2017 Invest in Technology Fund Expensive currency, global growth expected
to be better than domestic growth
S&P BSE IT TRI delivered 36% absolute returns from
Nov-17 to Nov-18
2018 Invest in Gold
NBFC loan book expansion in weak income
environment, low earnings growth & market
volatility
Gold delivered 10% absolute returns from Jan-18 to
Jan-19
2020 Aggressively invest in G-Sec Slowdown in growth and inflation. RBI
interventions increase in the wake of COVID-19
Crisil Dynamic Gilt Index delivered 3% absolute returns
from May 1, 2020 to July 17, 2020
44
ETF – Exchange Traded Funds. Source – MFIE. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors. Past
performance may or may not sustain in future. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit http://www.icraonline.com/legal/standard-disclaimer.html.
http://www.icraonline.com/legal/standard-disclaimer.htmlhttp://www.icraonline.com/legal/standard-disclaimer.htmlhttp://www.icraonline.com/legal/standard-disclaimer.html
-
Key Takeaways About The Scheme
45
Pure Top Down Approach
Macro based fund
Not a Value/Contra/Special Situation etc.
Opportunistic and Nimble in terms of sector allocation
No cap on market cap/sector/themes
Hassle free approach – No stress of changing themes basis Business Cycle
Long Term Approach
The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors. The asset allocation and investment strategy will be
as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.
-
Portfolio Features
46
Type of Scheme An open ended equity scheme following business cycles based investing theme
Plans
ICICI Prudential Business Cycle Fund &
ICICI Prudential Business Cycle Fund – Direct
Options Growth & Dividend
Minimum Application Amount Rs. 5,000 (plus in multiples of Re.1)
Minimum Additional Application Amount Rs. 1,000 (plus in multiples of Re.1)
Minimum Redemption Amount Any amount
Entry Load Not applicable
Exit Load
Upto 12 Months 1% of applicable NAV
More than 12 Months Nil
Fund Manager Anish Tawakley, Ihab Dalwai & Manish Banthia (involved in identifying business cycles)
Benchmark Index Nifty 500 TRI
SIP / SWP / STP Available
In addition to the fund managers managing this fund, overseas investment will be managed by Ms. Priyanka Khandelwal
-
Riskometers
47
ICICI Prudential US Bluechip Equity Fund (an open ended equity scheme investing predominantly in securities of large cap companies listed in the
United States of America) is suitable for investors who are seeking*:
Long term wealth creation An open ended equity scheme primarily investing in equity and equity related securities of companies listed on recognized stock
exchanges in the United States of America
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them
-
Riskometer & Disclaimer
ICICI Prudential Business Cycle Fund (An open ended equity scheme following business
cycles based investing theme) is suitable for investors who are seeking*:
Long Term wealth creation
An equity scheme that invests in Indian markets with focus on riding business cycles through dynamic
allocation between various sectors and stocks at different stages of business cycles
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
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 finan- cial 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 informa- tion 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.
48
-
The Greatest Lessons Regarding Cycles Are Learned Through
Experience…as In The Adage “Experience Is What You Got
When You Didn‟t Get What You Wanted”
Howard Marks
(Mastering the Market Cycle)
THANK YOU
49