Market Outlook 2019.pdf

Middle-of-the-Road Approach to Investing

Market Outlook 2019

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company and should not be circulated to investors/prospective investors.

Rear-View Mirror: Glancing Through 2018 (Equity)

Trump takes the first shot on Tariffs

36,000

India's rank in ease of doing business imporves from 100 to 77

Kim Jong Un crossed the border to meet South Korean president

35,000 34,000

US China trade war intensifies

33,000

FAANGs starts to correct

Aug-18

Jul-18

Jun-18

May-18

Apr-18

Mar-18

Feb-18

Jan-18

Powell does not buckle & increases interest rates

Head of auto EU and UK agreed giant Nissan- on an accord for RenaultBritain’s exit Mitsubishi arrested

China's growth slowest pace over a decade

32,000

HUAWEI CFO arrested in Canada

Dec-18

37,000

Congress wins 3 out of 5 state elections

Nov-18

S&P BSE Sensex Levels

38,000

Mutual Fund Scheme Categorization & Rationalisation

Concerns of Systemic liquidity risks in the NBFCs and HFCs

Trade War begins in Earnest

Oct-18

Union Budget Introduces LTCG on Equities

Sep-18

40,000 39,000

No Confidence motion against NDA govt. held

Crude breaches $ 80/Barrel

Source: Reuters, Morgan Stanley, Washington Post, Internal Research; Data as of Dec 31, 2018 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

2

Recap: Our Calls In 2018

Our Calls

Rationale Muted returns for last 5 Years

Invest in Gold in a staggered manner

Markets expected to be volatile and Large cap available at a better discount

Invest in Asset Allocation & Large Cap Oriented Schemes

Trade tensions, Unwinding of QE* by central banks & Oil price volatility

Invest in low duration schemes

Buy Accrual Schemes

Budget positive for Credit category

Redeem money from Midcap and SmallCap

Recap

Valuation expensive & risk reward benefit not favourable

QE – Quantitative Easing The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

3

Portfolio Action based on our calls – Mid- and Smallcap In 2018

ICICI Prudential Value Discovery Fund

ICICI Prudential Multicap Fund Midcap (10%)

Smallcap (4%)

Midcap (11%)

Large Cap (86%)

Smallcap (6%)

Started moving to Large caps by cutting down on mid- and smallcap; Our mid-year asset allocation in flexible schemes was skewed towards largecaps Large Cap (83%)

Source: Internal Research; Mid Year Allocation : Aug 31, 2018; Past performance may or may not sustain in future. The asset allocation and investment strategy will be as per the Scheme Information Document The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

4

Portfolio Action based on our calls – Move to Debt In 2018 Expecting markets to be volatile, we moved towards debt in our hybrid schemes. Our midyear allocation shows low net equity levels. ICICI Prudential Balanced Advantage Fund

ICICI Prudential Equity & Debt Fund

ICICI Prudential Multi-Asset Fund

ICICI Prudential Equity Savings Fund

Net Equity Levels (%) under normal circumstances

30-80

65-80

10-80

15-50

August Net Equity Levels (%)

30

60

47

15

Source: Internal Research Midyear Allocation - Aug 31, 2018; Past performance may or may not sustain in future. The asset allocation and investment strategy will be as per the Scheme Information Document. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

5

Portfolio Action based on our Calls – Reducing Duration In 2018 Scheme Name

Modified Duration (in years) Aug 2017 Aug 2018

ICICI Prudential Gilt Fund

10.13

0.14

ICICI Prudential All Seasons Bond Fund

6.41

1.22

ICICI Prudential Medium Term Bond Fund

2.97

1.61

ICICI Prudential Ultra Short Term Fund

0.96

0.28

ICICI Prudential Credit Risk Fund

2.12

1.51

ICICI Prudential Floating Interest Fund

1.14

0.46

ICICI Prudential Short Term Fund

2.74

1.17

ICICI Prudential Corporate Bond Fund

2.11

1.15

ICICI Prudential Savings Fund

0.88

0.53

Data as of Aug 31, 2018; Past performance may or may not sustain in future. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

6

Global Markets in 2018

The information contained herein iscontained solely for herein privateiscirculation reading/understanding of registered Advisors/Distributors of ICICI Prudential of Asset Company & shouldCompany not be circulated investors. The information solely for for private circulation for reading/understanding of registered Advisors/Distributors ICICIManagement Prudential Asset Management & shouldto notinvestors/prospective be circulated to investors/prospective investors.

7

Global Indices Performance in CY2018 (In INR terms)

BRAZIL (11.9%)

SWITZERLAND (-12.6%)

INDIA (5.9%)

FRANCE (-13.4%)

INDONESIA (-2.5%)

UK (-14.3%)

US (-4.7%)

RUSSIA (-8.5%)

HONG KONG (-14.8%)

TAIWAN (-8.6%)

SOUTH KOREA (-17.3%)

SINGAPORE (-10.3%)

GERMANY (-19.6%)

JAPAN (-12.1%)

CHINA (-24.6%)

Source: MFI Explorer,BRAZIL - Ibovespa Sao Paulo Index, INDIA – S&P BSE Sensex, INDONESIA – Jakarta Composite Index, US – NASDAQ, RUSSIA – RTS Index, TAIWAN – Taiwan Weighted Index, SINGAPORE – Strait Times, JAPAN – Nikkei, SWITZERLAND - Swiss Market Index, FRANCE – CAC 40 Index, UK – FTSE 100, HONG KONG – Hang Seng, SOUTH KOREA – Kospi, GERMANY – DAX Index, CHINA – SSE Composite Index ; Data as on Dec 31, 2018; Past performance may or may not sustain in future; Returns are in absolute terms. Map source: mapchart.net.Map not to scale. This map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India recognized by the Survey of India. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors Of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

8

US Rate Hikes and Global Yields

Global Yield Movement

8 7 6

3

12 months ago

2 1 0

Japan

Dec-18

Nov-18

Oct-18

Sep-18

Aug-18

Jul-18

Jun-18

Mar-18

Feb-18

Jan-18

2.2

May-18

The Fed hiked rates by 25 bps for the fourth time in 2018; markets reacted sharply to the news with the US markets recording its worst Christmas-eve trade in a decade

1 month ago

Euro Zone

2.4

4

UK

2.6

Dec-18

USA

The Fed hiked rates by 25 bps for the third time in 2018

5

China

2.8

Yield (%)

3.0

India

3.2

9

The Fed hiked rates again by 25 bps on the back of improving jobs data and robust growth prospects

US Federal Reserve (The Fed) hiked rates by 25 bps for the sixth time since 2015

Apr-18

US treasury yields (%)

3.4

Source: Source: CRISIL Research; Data as of Dec 28, 2018 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

9

Currencies Across The World in CY2018

5 0 -5 -10 -15 -20 -25 -30 -35 -40 -45

2.1

0.1 0.0 -0.2

-2.3 -2.7 -3.3 -4.5 -4.9 -4.9 -5.6 -5.7 -6.4 -7.5

-9.5 -16.6-17.0 -20.6

-38.8

Japan Thailand USA Hong Kong Singapore Malaysia Taiwan South Korea Germany Euro Zone Philiphines China UK Indonesia India South Africa Brazil Russia Turkey

% change to the USD

Currencies against the USD

Stronger-than-expected US growth momentum in 2018 prevented currencies across the world from capitalising on the gains made against the USD in 2017

Source: CRISIL Research; Data as of Dec 28, 2018 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

10

Indian Equity Market in 2018

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

11

Largecap, Midcap, Smallcap S&P BSE Sensex

S&P BSE Midcap

S&P BSE Smallcap

Closed at 36,068

Closed at 15,438

Closed at 14,706

27.5

25 20 15 10 5

1.9

5.1

0 2016

2017

46.1

50

2018

S&P Midcap Returns (%)

S&P BSE Sensex Returns (%)

30

40 30 20 10

8.0

0 -14.6

-10

S&P BSE Smallcap Returns (%)

70

57.7

60 50 40 30 20 10 0

1.8

-10

-24.7

-20 -30

-20 2016

2017

2018

2016

2017

2018

Source: BSEIndia; Data as of Dec 27, 2018; Past performance may or may not be sustained in future The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

12

Consumption and export story played out in 2018 Sector performance Returns performance (%)

30.0

24.5

20.0 10.0

9.8

4.1

0.1 0.7

0.0 -2.8

-10.0

-20.0 -30.0 -22.6

-20.9

-6.5

-22.7 -20.2

-22.5

-17.1

-15.7

-22.1 -31.0

-40.0

-40.5

-50.0

IT, FMCG, and Bankex were the only indices to witness gains in 2018

2018 Source: BSEIndia; Data as of Dec 27, 2018; Past performance may or may not be sustained in future The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management COmpany & should not be circulated to investors/prospective investors.

13

The Nifty’s Narrow Rally in 2018 Returns (%) Bajaj Finance

43.1

TCS

39.3

Tech Mahindra

37.2

Hindustan Unilever

28.3

Infosys

Nifty 50 rally was largely sustained by a few select stocks.

23.0

Kotak Mahindra Bank

20.2

Bajaj Finserv

18.5

Asian Paints

16.6

Reliance Industries

16.3

HDFC Bank

11.3

0

10

20

30

40

50

Source: BSEIndia; Data as of Dec 27, 2018; Past performance may or may not be sustained in future. The stock(s)/sector(s) mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in this stock(s). The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Manegement Company & should not be circulated to investors/prospective investors.

14

DII compensated for FPI selling in CY2018 50,000

FPI Net Flows (in Rs. Cr)

DII Net Flows (in Rs. Cr)

Net flows (in Rs. Cr)

40,000 30,000 20,000 10,000 0 -10,000

-20,000 -30,000

Oct - Dec 2018

Jul - Sep 2018

Apr - Jun 2018

Jan - Mar 2018

Oct-Dec 2017

Jul - Sep 2017

Apr-Jun 2017

Jan-Mar 2017

Oct-Dec 2016

Jul-Sep 2016

Apr - Jun 2016

Jan -Mar 2016

-40,000

Source: NSDL, BSEIndia; Data as of Dec 31, 2018; FPI – Foreign Portfolio Investors; DII – Domestic Institutional Investors The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Manegement Company & should not be circulated to investors/prospective investors.

15

Markets in 2018 – Some Unexpected Events

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

16

85.83 77.2 63.25 59.92

Dec-18

Nov-18

Sep-18

Jul-18

May-18

50.47

Mar-18

90 85 80 75 70 65 60 55 50 45

Jan-18

Oil Pirces (in USD/bbl)

Oil - The Joker In The Pack

Crude oil prices, largely expected to remain high, lost momentum towards the end of the year slipping to USD 50/bbl – owing to OPEC’s decision to ease supply

Source: CRISIL Research, Data as of Dec 28, 2018; OPEC – Organisation of Petroleum Exporting Countries The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

17

The Bitcoin Nose-dive

Bitcoin prices (in USD)

25,000 20,000

19,497

15,000 9,744

10,000

5,000

6,358

1,316

Oct-18

Aug-18

Jun-18

Apr-18

Feb-18

Dec-17

Oct-17

Aug-17

Jun-17

Apr-17

0

Dec-18

3,546

Year 2018 was marked by the collapse of the crypto-currency which saw a meteoric rise in 2017 and early 2018

Source: Coinmarketcap.com; Data as of Dec 24, 2018; Past performance may or may not be sustained in future. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

18

Invincible FAANG’s in the Bear Grip

170

Prices (in USD)

Netflix 430 380 330 280 230 180

190 140

1380

Google

1280 1180 1080

Dec-18

Nov-18

Oct-18

Sep-18

Aug-18

Jul-18

Jun-18

May-18

Apr-18

Mar-18

Feb-18

Jan-18

Dec-18

Nov-18

Oct-18

Sep-18

Aug-18

Jul-18

Jun-18

May-18

Apr-18

Mar-18

Feb-18

980

Jan-18

Prices (in USD)

240

Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

120

2100 1900 1700 1500 1300 1100

Jan-18 Feb-18 Mar-18 Apr-18 May… Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

220

Apple Prices (in USD)

Prices (in USD)

Prices (in USD)

Amazon

Facebook

270

Source: Reuters; Data as of Dec 24, 2018; Past performance may or may not be sustained in future.. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

19

Equity Investment Outlook 2019: Accumulation Phase

The information information contained herein is is solely for private private circulation circulation for for reading/understanding reading/understanding of of registered registered Advisors/Distributors Advisors/Distributors of Asset Management Management Company Company && should shouldnot notbe becirculated circulatedtotoinvestors/prospective investors/prospectiveinvestors. investors. The contained herein solely for of ICICI ICICI Prudential Prudential Asset

20

Puzzle To Unlock The Theme for Outlook 2019 (Solution to the puzzle is at the end of the presentation)

WORD JUMBLE –

Unscramble the words below using the clues given alongside

- A Thorny Plant - Another word for ‘STOP’

Now rearrange the circled letters and complete the statement below to unlock the theme for the

INVESTMENT OUTLOOK 2019

- Short for Capital Expenditure - To err is to be _____

indicators entering the moderate zone, we believe investing is now in the

- A Clue - _____ and Effect - To Call The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

21

Market Checklist ‘VCTS’ Back To The Neutral Zone

P/E – Price-to-Earnings; P/B – Price to Book Value Ratio; MF – Mutual Funds; FPI – Foreign Portfolio Investors; GDP – Gross Domestic Product The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.

22

In-House Equity Valuation Index: Back to the Neutral Zone 170 Book Partial Profits

150

130

The Valuation Index indicates that investors could consider asset allocation schemes.

Incremental Money to Debt

110

Asset Allocation

90

110.44 Invest in Equities

70 Aggressively invest in Equities

Dec-18

Dec-17

Dec-16

Dec-15

Dec-14

Dec-13

Dec-12

Dec-11

Dec-10

Dec-09

Dec-08

Dec-07

Dec-06

Dec-05

50

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; Asset Allocation – Schemes that invest both in equity and fixed income The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

23

Valuations – P/E and P/B within comfort zone Nifty 50 P/E Valuations

6

24

5.5

22

5

Nifty 50 P/B ratio

4.5

20 18

P/B ratio

16 14

4 3.5 3

2.5

12

2 1.5

8

1

Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 Oct-13 Jul-14 Apr-15 Jan-16 Oct-16 Jul-17 Apr-18 Dec-18

10

Nifty 50 Trailing PE

Average

-1 SD

+/- 1SD

Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 Oct-13 Jul-14 Apr-15 Jan-16 Oct-16 Jul-17 Apr-18 Dec-18

P/E Valuations

26

Nifty 50 P/B ratio

Average

-1 SD

+/- 1SD

Source: NSE India; Data as of Dec 27, 2018; P/E – Price to Earnings; P/B – Price to Book Value ; SD – Standard Deviation The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.

24

Valuations – Largecap & Midcap discount and Dividend Yield G-Sec yield reasonable over earnings yields but has come off highs

10

48

43.8

43 38

33 28

22.0

23

10

7

8 4 6 1 4

(2)

2

Nifty Midcap 100 P/E

Yield gap

Earnings Yield

Dec-18

Dec-16

Dec-14

Dec-12

Dec-10

Dec-08

Dec-06

Dec-18

Nov-18

Sep-18

Jul-18

May-18

Mar-18

Jan-18

Nifty 50 P/E

0

Dec-04

(5)

18

Dec-02

P/E Valuations

53

Nifty 50 earnings yield (%)

58

12

10-yr G-sec yield (%)

Largecaps still at a discount

63

India 10Y G-sec yield

Source: NSE India, CRISIL Research; Data as of Dec 28, 2018 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

25

Valuations – Marketcap To GDP Mcap to GDP ratio below 100

95%

93%

Marketcap to GDP ratio

90% 85%

80%

80%

75% 70%

71%

2018 2017 2016

65%

The Marketcap to GDP data has been moderating on the back of volatile equity markets and the slowdown in economic growth. It is higher than 2016- but lower than 2017-levels.

Dec

Nov

Oct

Sep

Aug

Jul

Jun

May

Apr

Mar

Feb

Jan

60%

Source: BSE, RIMES, Morgan Stanley Research; Data as of Dec 21, 2018; GDP - Gross Domestic Product The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.

26

Business Cycle – Capacity Utilisation

Gross Capital Formation (%YoY)

13

RBI Capacity utilisation levels % (RHS) 12.9 76.1

8

80 78 76 74

3

72 70

-2 68

Capacity utilisation picking up but yet to peak out

66

Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18

-7

RBI Capapcity Utilisation Levels (%)

Gross capital formation (% YoY)

Source: RBI, JM Financial, Data as of September 2018 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.

27

Business Cycle – Credit Growth outpacing Deposit Growth

Credit Growth

16%

15.1%

14%

16%

14%

12%

12%

10%

10% 10.6%

8%

Deposit Growth 14.6%

9.4%

8% 6%

6% 2018 2017 2016

4% 2%

4.7%

2018 2017 2016

4% 2%

4.0%

Dec

Nov

Oct

Sep

Aug

Jul

Jun

May

Apr

Mar

Feb

Dec

Nov

Oct

Sep

Aug

Jul

Jun

May

Apr

Mar

Feb

Jan

Jan

0%

0%

Source: RBI, Morgan Stanley; Data as of Dec 21, 2018 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.

28

Sentiment – Mutual Fund flows moderating Domestic Mutual Fund Flows (In Rs. Bn)

300

Domestic Mutual Fund Flows (In Rs bn)

250 200

Domestic mutual

150

fund participation

100

has also tapered off from its 2017-levels,

50

indicating a

0

moderation in investor sentiment Nov-18

Sep-18

Jul-18

May-18

Mar-18

Jan-18

Nov-17

Sep-17

Jul-17

May-17

Mar-17

Jan-17

Nov-16

Sep-16

Jul-16

May-16

Mar-16

Jan-16

-50

Source: AMFI, CLSA, Data as of November 2018; The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.

29

Sentiment – Hybrid schemes flows Slowing Down Monthly Flows into Hybrid Schemes

120

MF inlfows (in Rs. Bn)

100 80

Hybrid schemes inflows have been tapering off. At their peak, they were nearly half of the equity inflows.

60 40 20

Nov-18

Sep-18

Jul-18

May-18

Mar-18

Jan-18

Nov-17

Sep-17

Jul-17

May-17

Mar-17

Jan-17

Nov-16

Sep-16

Jul-16

May-16

Mar-16

Jan-16

0

Source: CLSA; Data as of November 30, 2018 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.

30

Triggers For 2019

Election

2019 Triggers Global trade war tension

Reduction of Bond Buying Program

Earnings

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

31

Trigger – Elections: Good Time to Accumulate Equity

20,000

Pre-election Post-election 28,000

16,000

Pre-election

Apr-15

Feb-15

Dec-14

Post-election

Oct-14

Apr-10

Apr-05

Feb-05

Dec-04

Oct-04

Aug-04

Jun-04

Apr-04

Feb-04

Dec-03

Oct-03

Feb-10

20,000

Dec-09

8,000

Oct-09

4,000

Aug-09

10,000

Jun-09

4,500

22,000

5,000

Apr-09

24,000

Feb-09

12,000

5,500

Dec-08

26,000

Oct-08

14,000

Aug-14

6,000

Jun-14

Post-election

30,000

Apr-14

Pre-election

6,500

18,000

32,000

Feb-14

7,000

S&P BSE Sensex Levels – General Elections 2014

Dec-13

7,500

S&P BSE Sensex Levels – General Elections 2009

Oct-13

S&P BSE Sensex Levels – General Elections 2004

Source: BSE India, Election Commission; Data for the period between October 2003 – April 2005, October 2008 – April 2010, and October 2013 – April 2015 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors & should not be circulated to investors/prospective investors.

32

Triggers – Bond-buying By Central Banks Back To Normal

12,424

Bond-buying (in USD bn)

14,000 12,000

4,000 2,000 0

4,108

4,082

3,865

2,602

5,365

5,365

4,498

End 2014

2.58%

-0.04%

-0.03%

-0.02%

2.54%

2.0%

1.0%

0.0% 4,451

4,040

3,440

891 End 2007

2.63%

0.5%

990 2,202

2.37%

2.50%

1.5%

2,516

8,000 6,000

4,840

Market Expectations of Future Central Bank Rates

3.0% 2.5%

4,840

9,616

10,000

14,244 13,644

Interest Rates

16,000

End 2016

End 2018

End 2019 Forecast

-0.5%

-0.05%

-0.01% -0.41%

-0.41%

-0.36%

-0.09%

-1.0% 3 months

6 months

US Federal Reserve

European Central Bank

US Federal Reserve

Bank of Japan

Total

Bank of Japan

Source: Edelweiss Securities; Data as of Dec 31, 2018

0.21%

1 year

2 years

3 years

European Central Bank

Source: Eaton Vance; Data projections made as on Nov 30, 2018

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

33

Triggers - US China Trade War Timeline “Truce but no peace” Trump takes the first shot with 30% tariffs on solar panels

Feb 18

China retaliates this time with tariffs on 128 US products

Trump takes the second shot with tariffs on Steel & Aluminium

Mar 18

China matches tariffs Another $16 Billion worth of tariffs on US products

Trade war begins in earnest Mar 18

Aug 18 Sep 18

Beijing hits Trump's political base by targeting select industries

Aug 18

Jul 18 Aug 18

Dec 18

Both countries agree to a trade truce in their meeting at Buenos Aires, Argentina

An impasse – Both parties cancel scheduled talks

Trade talks fall through

Source: South China Morning Post, The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

34

Equity & Hybrid Scheme Recommendations for 2019

Theinformation informationcontained containedherein hereinisissolely solelyfor forprivate privatecirculation circulationfor forreading/understanding reading/understandingofofregistered registeredAdvisors/Distributors Advisors/DistributorsofofICICI ICICIPrudential PrudentialAsset AssetManagement ManagementCompany Company&&should shouldnot notbebecirculated circulatedtotoinvestors/prospective investors/prospectiveinvestors. investors. The

35

Summary Equity Outlook - 2019 • Elections – key trigger for 2019 outlook on equities • Moved to neutral stance from a cautious one; Recommend accumulating equity in a staggered manner through SIP or STP • Neutral on mid- and smallcap post the recent correction; Recommend adding them systematically • Asset Allocation funds and large cap oriented schemes preferred choice for lump-sum investment • Post Oil Correction - Recommend tactical allocation to infrastructure and banking theme. • Valuations are fully priced in – Aim to explore special themes and bottom up stock picking strategies in 2019 • Remain watchful of impact of reduction in central banks’ bond-buying programme, earnings trajectory, and escalation of trade-war tensions between US and China. • Foreign flows expected to remain positive; Any reversal in these indicators would make us more positive on equities. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

36

Risk To Our Equity Outlook 2019

Risk 2019 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

37

Our Asset Allocation Bouquet These schemes aim to benefit from volatility and manage equity exposure based on valuations. ICICI Prudential Regular Savings Fund*

ICICI Prudential Equity Savings Fund

ICICI Prudential Balanced Advantage Fund

Conservative Hybrid Fund

Equity Savings Fund

Dynamic Asset Allocation or Balanced Advantage Fund

Net Equity–

Net Equity–

Net equity –

10-25%

15-50%

30-80%

ICICI Prudential Multi-Asset Fund

ICICI Prudential Equity & Debt Fund

Multi Asset Allocation

Aggressive Hybrid

Min of 10% in each of the three asset classes

Net Equity–

65-80%

The asset allocation and investment strategy will be as per the Scheme Information Document, *This scheme will attract debt taxation. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

38

ICICI Prudential Balanced Advantage Fund S&P BSE Sensex Levels vis-a-vis ICICI Prudential BAF Net Equity Exposure (%)

36000

Net Equity 77.65 35965

Net Equity 77.40

75 70

33000

Sensex Levels

80

65

29183

30000

60

27000

55

24000

50

23002

21000 18000

45 40

18620

15000

Sensex Level

Net Equity Net Equity 31.65 34.30

BAF Net Equity Exposure (%)

39000

35 30

Net Equity Exposure %

Source: BSE India & MFIE, As on 30th November, 2018. ICICI Prudential BAF stands for ICICI Prudential Balanced Advantage Fund. The in-house valuation model starts from March 2010 onwards. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

39

ICICI Prudential Multi-Asset Fund Provides capital appreciation

OPTIMAL PORTFOLIO

EQUITY

Is a hedge against risks such as inflation

GOLD

DEBT

Offers stable and consistent accrual income

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

40

Equity Scheme Recommendations

Lump-sum Pure Equity Schemes ICICI Prudential Bluechip Fund

The scheme predominantly invests in large-cap stocks. It follows a benchmark hugging approach.

ICICI Prudential Multicap Fund

The scheme invests in stocks across market capitalisations

Thematic / Sectoral ICICI Prudential Infrastructure Fund ICICI Prudential Banking & Financial Services Fund ICICI Prudential India Opportunities Fund

These thematic schemes are for investors looking for exposure in various themes.

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

41

Our SIP Recommendations

ICICI Prudential Value Discovery Fund

ICICI Prudential Large & Midcap Fund

ICICI Prudential Midcap Fund

(An open ended equity scheme following a value investment strategy)

(An open ended equity scheme investing in both largecap and midcap stocks)

(An open ended equity scheme predominantly investing in mid cap stocks)

ICICI Prudential Smallcap Fund

ICICI Prudential US Bluechip Equity Fund

(An open ended equity scheme predominantly investing in smallcap stocks)

(An open ended equity scheme predominantly securities of large cap companies listed in the USA)

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

42

FIXED INCOME OUTLOOK 2019: “Earn the Carry”

433 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

43

Rear-View Mirror: Glancing Through 2018 (Debt)

PNB Bank detects frandulent transactions

8.4 8.2

7.8

Govt. announces Bank Recap

Crude breaches $ 80/Barrel

Viral Acharya expresses concenrns over RBI limited power

RBI removes min maturity cap for FPI

RBI Governor Urjit Patel Resigns

7.6

Jun-18

May-18

Apr-18

Mar-18

Feb-18

Jan-18

6.6

RBI steps up OMO purchases to INR 500 Bn

Dec-18

6.8

IMD Predicts Normal Monsoon

Congress wins 3 out of 5 state elections

Nov-18

7.0

Oct-18

Union Budget Proposes steps to broaden bond markets

RBI hikes rates by 25 bps to 6.25%

Sep-18

BJP falls short of majority in Karnataka

7.2

Aug-18

7.4

Concerns of Systemic liquidity risks in the NBFCs FX and HFCs reserves RBI follows up decline by with one more most since 25 bps hike 2011 RBI's OMO RBI Eases liquidity purchases requirements and continue with Steps up OMO purchases INR 1.6 Tn

Jul-18

10-yr G-Sec yield (%)

8.0

RBI keeps policy rates unchanged

RBI changes stance to Calibrated Tightening

CCEA approves increase in MSP

Source: RBI, Reuters, BSE India; Data as of Dec 31, 2018, CCEA- Cabinet Committee on Economic Affairs, PNB – Punjab National Bank, OMO – Open Market Operations, IMD-India Meteorological Department. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

44

FPI Investment (Debt) With G-Sec Movement 5

8.5%

FPI debt flows vs 10-yr G-sec yields

8.0%

3 2

7.5%

1

7.0%

0 -1

6.5%

-2

6.0%

-3

2018 saw heavy outflows from the debt market; however it stabilized towards the end of the year

FII Investment (Debt), rhs

Dec-18

Oct-18

Aug-18

Jun-18

Apr-18

Feb-18

Dec-17

Oct-17

Aug-17

Jun-17

Apr-17

Feb-17

Dec-16

Oct-16

Aug-16

Jun-16

Apr-16

Feb-16

5.5%

Dec-15

-4

10-yr G-Sec Yield

FPI Debt Flows (in USD Bn)

4

10-yr G-sec

Source: Deutsche Bank, Morgan Stanley; Data as of Dec 31, 2018; FPI – Foreign Portfolio Investors The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

45

Man to Man Marking – RBI Way

Policy Instrument

Objective

Policy Interest Rate

OMO Operations

Inflation

Liquidity

Currency Intervention

Manage Currency Volatility

OMO – Open Market Operations The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

46

Side Effects of Man to Man marking strategy “warranting to keep neutral stance”

Building INR Assets

More OMOs by RBI Resulting in Distortion of Yield Curve Increased risks in investors portfolios Less cushion to take macro shock

Depleting Dollar Assets

RBI Balance Sheet Shifting from Dollar Assets to INR Assets

Resulting in Higher Volatility

RBI supporting INR on the expense of Forex Reserve INR Becoming Overvalued Resulting in higher CAD Higher dependence on external savings (FPI, FDI, NRI Deposits)

Resulting in Higher Volatility

CAD – Current Account Deficit, FPI – Foreign Portfolio Investor, FDI – Foreign Direct Investment, OMO – Open Market Operations, The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

47

Side Effects of Man to Man marking strategy “warranting to keep neutral stance” INR bn

OMO Operations

600

430 500

500 400

500

420 410

360

300

400 200

200 104

103

380

Dec-18

Nov-18

Oct-18

370

Sep-18

Jul-18

Jun-18

-

May-18

-

Apr-18

390

100

Aug-18

100 -

Foreign Reserves (In USD Bn)

Source: JM Research, Internal Research; Data as of Dec 31, 2018 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

48

India in a Different Cycle Warranting Neutral Stance

Growth

Inflation

Central Bank Outlook

Advance Markets

Indian Market

Strong

Moderate

Strong

Benign

Hawkish

Neutral

Advanced economies being in the final stages of growth resorted to quantitative easing, resulting in growth headwinds in emerging markets such as India, where growth is yet to peak out

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

49

Macros Outlook“warranting Mixed Macros for neutral stance” Warrant Neutral Stance Indicators RBI Policy Rates CPI inflation Oil Prices (USD/barrel) CAD (% of GDP)

Dec-18

Outlook

Remarks

6.50%

Neutral

Upcoming policy ; possibility of moving to Neutral stance

2.33% (Nov 2018)

Neutral

Core Inflation still sticky

53.26

Neutral

Monitor long term trend

Neutral

Temporary relief due to crude oil

2.4% (Apr-Jun 2018)

Fiscal Deficit (% of GDP)

3.30%

Negative

Fiscal discipline in an election year – Challenging

FX Reserves (USD Bn)

394.15

Negative

Depleting - due to RBI supporting INR

Negative

Post G-Sec rally, risk reward benefit lower

Cautious

Election outcome

10yr G-Sec Political Scenario

7.37% Election Year (2019)

Source: MOSPI,RBI, Internal Research; Data as of Dec 31, 2018, CPI – Consumer Price Inflation; CAD – Current Account Deficit; FX – Foreign Exchange; RE –Revised estimate, BE- Budget Estimate; GDP- Gross Domestic Product The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

50

Fiscal Deficit In An Election Year 9.6

10

8.6 3.0

8

2.4

7

2.1

2.0

6.7

6.7

6.9

2.2

2.6

3.1

6.7 5.0

5.9

4.9

3.5

3.0

6.1

2.6

4.5

4.1

3.9

3.5

3.6

3.3

FY19BE

6.2

6.6

FY18RE

1.5

7.0

FY17

4.1

2 1

6.9

FY16

3

7.1

FY15

4

7.8 1.9

6

States

FY14

Fiscal Deficit (as% of GDP)

9

5

Centre

2.6

Maintaining fiscal discipline seems challenging, due to upcoming elections and revenue shortfall

FY13

FY12

FY11

FY10

FY09

FY08

0

Source: MOSPI, Internal Research; Data as of Dec 31, 2018, RE –Revised estimate, BE- Budget Estimate; GDP – Gross Domestic Product The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

51

Expected

-6 -5 -4 -3 -2 -1 0 1 2 3 4

10 8 7 6 5 4

10 Yr G-Sec(%)

9

Recent steep decline in oil prices bodes well for CAD, especially since non-oil imports have remained firm

3 2

Sep/02 Mar/03 Sep/03 Mar/04 Sep/04 Mar/05 Sep/05 Mar/06 Sep/06 Mar/07 Sep/07 Mar/08 Sep/08 Mar/09 Sep/09 Mar/10 Sep/10 Mar/11 Sep/11 Mar/12 Sep/12 Mar/13 Sep/13 Mar/14 Sep/14 Mar/15 Sep/15 Mar/16 Sep/16 Mar/17 Sep/17 Mar/18 Sep/18

CAD (% of GDP)

India Got Lucky: Current Account Deficit (CAD)

CAD

10 Yr G-Sec (RHS)

Source: CRISIL Research, Internal Research; Data as of Sep 30, 2018; The The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

52

Some Respite in Trade Deficit -22

10.0 9.5 9.0

8.5 8.0

-12

7.5 7.0

-7

6.5 6.0

-2

G-Sec (%)

Trade Balance (In USD billions)

-17

Trade Deficit remains elevated despite improvement. Exports could see a drag due to slowdown in global economy

5.5

Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 May-16 Oct-16 Mar-17 Aug-17 Jan-18 Jun-18 Nov-18

5.0

Trade Balance

GSEC (RHS)

Source: RBI; Data as of Nov 30, 2018; The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

53

10 Yr G-Sec

Brent Crude Index

G-Sec rally in 2018 was mainly owing to the sharp decline in crude oil prices

Dec/18

Jul/18

Feb/18

Sep/17

Apr/17

Nov/16

15

Jun/16

6.0

Jan/16

35

Aug/15

6.5

Mar/15

55

Oct/14

7.0

May/14

75

Dec/13

7.5

Jul/13

95

Feb/13

8.0

Sep/12

115

Apr/12

8.5

Nov/11

135

Jun/11

9.0

Jan/11

10 Year G-Sec (%)

10 Year G-Sec vs Brent Crude

Brent Crude Index (RHS)

Source: CRISIL Research, Internal Research; Data as of Dec 31, 2018 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

54

Food for Thought - Inflation Food Inflation (%) Headline Inflation (%), RHS

8%

8%

6%

6%

4%

4%

2%

2%

0%

0%

-2%

-2%

Inflation Weightages:

Core: 47.33%

Food: 45.86%

Headline Inflation (%)

Core Inflation (%) Fuel and light Inflation (%)

Unusually low food prices kept inflation below RBI forecast. However, sticky core inflation and sudden reversal in prices of volatile perishable items could be a risk.

Fuel & Light : 8.55%

Source: RBI, Internal Research; Data as of Dec 31, 2018 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

55

Liquidity Scenario 600,000

System Liquidity

500,000

Core Liquidity

400,000

Liquidity remained in the deficit zone due to:

Amount (in Rs. Cr)

300,000 200,000

• Credit growth outpacing deposit growth • Rise in currency circulation • Capital Outflows (moderated towards the end of the year)

100,000 0 -100,000 -200,000 -300,000

Mar-19

* * Jan-19

Nov-18

Sep-18

Jul-18

May-18

Mar-18

Jan-18

Nov-17

Sep-17

Jul-17

May-17

Mar-17

Jan-17

Nov-16

Sep-16

Jul-16

May-16

Mar-16

Jan-16

Nov-15

Sep-15

Jul-15

May-15

Mar-15

Jan-15

-400,000

Source: RBI, Internal Research; Actual Data as of Nov 30, 2018, * - Estimates The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

56

Dichotomy Between G-Sec & Corporate Bonds Corporate Bonds still at elevated levels compared to G-Sec 8.8

2018

9.5

2017

7.6 7.2

8.5

7.6 2017

8.0 7.5

6.8 AAA - 1 AAA - 3 AAA - 5 AAA - 10 Yr Yr Yr Yr AAA - 1 Yr 7.5 8.4 1.0

AAA - 3 Yr 7.7 8.6 1.0

AAA - 5 Yr 7.7 8.7 1.0

AAA - 10 Yr 7.9 8.7 0.8

2017

7.2

6.8 6.4

7.0 AA CB - AA CB - AA CB - AA CB 1 Yr 3 Yr 5 Yr 10 Yr Date 2017 2018 Movement

Yields (%)

8.0

Date 2017 2018 Movement

2018

9.0

Yields (%)

Yields (%)

8.4

8.0

2018

AA CB - 1 Yr AA CB - 3 Yr AA CB - 5 Yr AA CB - 10 Yr 7.8 8.0 8.2 8.4 9.0 9.2 9.3 9.2 1.2 1.1 1.0 0.8

6.0 Gsec-1yr Gsec-3yr Gsec-5yr Gsec-10yr Date

Gsec - 1 yr

Gsec - 3 yr

2017 2018 Movement

6.3 7.1 0.8

6.7 7.3 0.6

Source: CRISIL Research,; Data as of Dec 31 2018 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

Gsec - 5 yr 7.1 7.5 0.4

Gsec - 10 yr 7.3 7.6 0.3

57

Corporate Bond & Gsec spread over Repo “High Margin of safety” Avg. 270 bps

9.5 9.0

Avg. 210 bps

Yields (%)

8.5 8.0

Avg. 90 bps

7.5 7.0

S P R E A D

Corporate bonds provide better riskadjusted returns over G-Sec, as they provides better cushion from any unforeseen event

6.5 6.0 1 Year

3-Year AAA

AA

5-Year Gsec

10-Year

Repo Rate

Source: CRISIL Research, Internal Research; Data as of Dec 31, 2018 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

58

Historical Corporate Spreads Over Gsec 700 600

Spreads (in bps)

500

Corporate spreads over GSec widened over the last few quarters as compared to the 10-yr average. Advocate accrual strategy to benefit out of higher carry

400 300 200 100 High

0 -100

AAA over Gsec

AA over AAA A over AAA AA Over Gsec

Source: CRISIL Research, Internal Research; Data as of Dec 31, 2018

A over AA

A over Gsec

Current Median Low

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

59

Debt Strategy To Follow

Accrual Schemes

Low/Short Duration Schemes

Dynamic Duration Schemes

BENEFITS By capturing current Elevated Yield

By mitigating interest rate volatility

From volatility by active duration management

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

60

Triggers For 2019

Global Bond Yield Movement

Election

2019 Triggers Pre-Election Populist Measures

RBI Stance

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

61

Summary Fixed Income Outlook - 2019 •

Post the G-Sec rally, recommend going long on low/short duration schemes (belly of the curve) and go short on long duration schemes (long end of the curve).

•

Moved our stance from cautious to neutral.

•

Credit demand in the economy is strong and we recommend to benefit the carry from the short end of the yield curve.

•

Expect volatility in the long end of the curve and we recommend trading strategy to beat this volatility.

•

As from the above statement, it would be clear that we would like to recommend  Accrual schemes which provide better carry,  Low/Short duration schemes which can mitigate interest rate volatility  Dynamic duration schemes which are agile enough to benefit out of interest rate volatility.

•

Remain watchful on any fiscal slippages, reversal in any food items which are highly perishable, global uncertainty and escalating trade tensions between US-China.

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

62

Debt Valuation Index 10 Aggressively in High Duration

9 8

We recommend investors to invest in Ultra Low / Low Duration schemes or accrual schemes such as ICICI Prudential Credit Risk Fund.

High Duration

7 6 5

Moderate Duration

4 3

2.5

Low Duration

2

Dec-18

Oct-18

Aug-18

Jun-18

Apr-18

Feb-18

Dec-17

Oct-17

Aug-17

Jun-17

Apr-17

Feb-17

Dec-16

Oct-16

Aug-16

Jun-16

Feb-16

Dec-15

1

Apr-16

Ultra Low Duration

For those investors who aim to benefit from volatility we recommend investment in ICICI Prudential All Seasons Bond Fund.

Debt Valuation Index considers WPI, CPI, Sensex YOY returns, Gold YOY returns and Real estate YOY returns over G-Sec yield, Current Account Balance and Crude Oil Movement for calculation. WPI – Wholesale Price Index; CPI – Consumer Price Index. 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. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

63

Fixed Income scheme recommendations: 2019

The PrudentialAsset Asset Management Company & should circulated to investors/prospective investors. Theinformation informationcontained containedherein hereinisissolely solelyforforprivate privatecirculation circulationfor forreading/understanding reading/understandingofofregistered registeredAdvisors/Distributors Advisors/Distributors ofofICICI ICICI Prudential Management Company & should notnot bebe circulated to investors/prospective investors.

64

Fixed Income Recommendations

ICICI Prudential Floating Interest Fund ICICI Prudential Ultra Short Term Fund ICICI Prudential Medium Term Bond Fund ICICI Prudential Credit Risk Fund

ICICI Prudential All Seasons Bond Fund ICICI Prudential Short Term Fund

Cash Management Solution (which benefits from better risk adjusted returns)

Accrual Schemes (which benefits from capturing yields at elevated levels)

Dynamic Duration Schemes ( which benefits from volatility by actively managing duration) Low/Short Duration Schemes (which benefits from mitigating interest rate volatility)

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

65

Accrual Based Schemes Investment Process Well Researched Credit Universe • Based on various filters, qualitative and quantitative research

Broadened Exposure • Mitigating concentration risk by diversification

Managing Duration Risk • Clearly defined modified duration range

The scheme has an Independent credit evaluation, approval, and monitoring process which does not solely relying on the Fund Manager’s judgment to invest in a paper. The scheme focuses on direct origination* which helps in alpha generation and monitoring.

Strict Internal Limits at Issuer Level and rating level

The asset allocation and investment strategy will be as per Scheme Information Document. *Direct origination means no involvement of intermediaries. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

66

Mitigating risk – ICICI Prudential Credit Risk Fund

(An open ended debt scheme predominantly investing in AA and below rated corporate bonds

14% in AAA & equivalent rated debt instruments, TREPS & Net Current Assets

90* different securities with average exposure of around 1.07% to each individual issuer

Liquidity Risk

The portfolio is well diversified and invests across various credit ratings ranging between AAA to A-

Credit Risk

Concentration Risk

Duration Risk

Duration Risk reduced by maintaining modified duration at the lower-end – current modified duration – 1.30 yrs

All data as of November 30, 2018 ; *Portfolio includes CPs and CDs; The portfolio of the scheme is subject to changes with in the provisions of the Scheme Information document of the scheme. Please refer to the SID for investment pattern, strategy and risk factors. The asset allocation and investment strategy will be as per Scheme Information Document. TREPS – Third Party Repos The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

67

ICICI Prudential Credit Risk Fund The scheme portfolio is well-diversified across a large number of securities which reduces risk pertaining to high exposure in a single security. 10.14% Yield to Maturity

90

No. of securities in the scheme portfolio

Aims to invest in well researched corporate bonds

1.07%

Average exposure to a single security in the portfolio

Aims to generate alpha from any potential credit upgrades

5.08%

Highest exposure to single security in the portfolio

Aims to maintain stable accrual income with Hold-to-Maturity approach

31.9%

Exposure (as % of NAV) to the top 10 holdings in the portfolio

Data as of November 30, 2018; The asset allocation and investment strategy will be as per the Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

68

ICICI Prudential PMS Strategy – Flexicap & Contra Portfolio

Flexicap Portfolio Core

Satellite

Core comprises of approximately 60%-70% of the Portfolio. The core is predominantly targeted towards sectors which are value on a relative or absolute basis.

The Satellite will be blend of strategies such as Special Situation, GARP (Growth at Reasonable Price) philosophy, thematic etc. This bucket will be used opportunistically to book profit and increase weight of the Core Portfolio.

Contra Portfolio ICICI Prudential PMS Contra Portfolio aims to provide long term capital appreciation and generate returns by investing in underperforming stocks or sectors, which are available at intrinsic valuations and are expected to perform well in the long run. To strike an appropriate balance of concentration and diversification Portfolio Manager retains the flexibility to invest across market capitalization and sectors. The investment strategy, approach and the structure of the portfolio herein involves risk and there can be no assurance that specific objectives will be met under differing market conditions or cycles. The investment strategy and the composition of the portfolio as stated herein is only indicative in nature and is subject to change within the provisions of the disclosure document and client agreement without any prior notice to investors. Please refer to the disclosure document & client agreement for details and risk factors. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

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ICICI Prudential PMS Multi-Manager Strategic Equity Portfolio

ICICI Prudential PMS Multi-Manager Strategic Equity Portfolio aims to invest in Mutual Fund schemes which invest in equity and equity related instrument of a particular sector/theme. Indicative no of schemes:3 to 6 Max weight in single scheme: 40% Portfolio manager may rebalance the portfolio on yearly basis, in order to make necessary changes in the portfolio. However portfolio manager reserves the right to rebalance the portfolio at any given point in time based on change in market conditions.

The investment strategy, approach and the structure of the portfolio herein involves risk and there can be no assurance that specific objectives will be met under differing market conditions or cycles. The investment strategy and the composition of the portfolio as stated herein is only indicative in nature and is subject to change within the provisions of the disclosure document and client agreement without any prior notice to investors. Please refer to the disclosure document & client agreement for details and risk factors. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

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Upcoming Events - 2019 Canada Federal election By Oct. 21

India

General Election April | May

U.S.

Fed Meetings

Japan

Jan. 29–30 | March 19–20 April 30–May 1 | June 18–19 July 30–31| Sept. 17–18 Oct. 29–30 | Dec. 10–11

Bank of Japan Meetings Jan. 22–23 | April 24–25 July 29–30 | Oct. 30–31

UK

UK to Leave European Union March 29

Cricket World Cup May 30–July 14

Indonesia

European Union

General Election

ECB Meetings

April 17

Jan 24 | June 6 | Oct 24 March 7 | July 25 | Dec 12 April 10 | Sept 12

ECB President Mario Draghi's term ends Oct. 31 Parliamentary elections May 23–26

South Africa

Argentina General Election Oct. 27

General Election Between May 8

Australia Federal Election By May 18

and Aug. 7

Source: BlackRock Investment Institute, November 2018. Notes: The ECB meetings are those accompanied by press conferences. The BoJ events shown are followed by the publication of the central bank’s outlook report. The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

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Our Equity Schemes Scheme Name

Type of Scheme

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 Midcap Fund

An open ended equity scheme predominantly investing in mid cap stocks.

ICICI Prudential Smallcap Fund

An open ended equity scheme predominantly investing in small cap stocks.

ICICI Prudential Value Discovery Fund

An open ended equity scheme following a value investment strategy.

ICICI Prudential Multicap Fund

An open ended equity scheme investing across large cap, mid cap, small cap stocks.

ICICI Prudential Infrastructure Fund

An open ended equity scheme following infrastructure theme.

ICICI Prudential Banking & Financial Services Fund

An open ended equity scheme investing in Banking & Financial Services Sector

ICICI Prudential India Opportunities Fund

An Open Ended Equity Scheme following Special Situation theme

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

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Our Hybrid Schemes

Scheme Name

Type of Scheme

ICICI Prudential Balanced Advantage Fund

An open ended dynamic asset allocation fund

ICICI Prudential Regular Savings Fund

An open ended hybrid scheme investing predominantly in debt instruments

ICICI Prudential Equity Savings Fund

An open ended scheme investing in equity, arbitrage and debt.

ICICI Prudential Equity & Debt Fund ICICI Prudential Multi-Asset Fund

An open ended hybrid scheme investing predominantly in equity and equity related instruments 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.

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

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Our Debt Schemes

Scheme Name

Type of Scheme

ICICI Prudential Ultra Short Term Fund

An open ended ultra-short term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 3 months and 6 months.

ICICI Prudential Short Term Fund

An open ended short term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 1 Year and 3 Years.

ICICI Prudential Medium Term Bond Fund

An open ended medium term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 3 Years and 4 Years. The Macaulay duration of the portfolio is 1 Year to 4 years under anticipated adverse situation.

ICICI Prudential Credit Risk Fund

An open ended debt scheme predominantly investing in AA and below rated corporate bonds.

ICICI Prudential Floating Interest Fund

An open ended debt scheme predominantly investing in floating rate instruments (including fixed rate instruments converted to floating rate exposures using swaps/derivatives).

ICICI Prudential All Seasons Bond Fund

An open ended dynamic debt scheme investing across duration.

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

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Riskometers 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. *Investors should consult their financial advisers if in doubt about whether the product is suitable for them

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. *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

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

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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. *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  An open ended equity scheme following a value investment strategy *Investors should consult their financial advisers if in doubt about whether the product is suitable for them 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 *Investors should consult their financial advisers if in doubt about whether the product is suitable for them The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

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Riskometers 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. *Investors should consult their financial advisers if in doubt about whether the product is suitable for them ICICI Prudential Credit Risk Fund is suitable for investors who are seeking*:

 Medium term savings  A debt scheme that aims to generate income through investing predominantly in AA and below rated corporate bonds while maintaining the 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 Medium Term Bond Fund is suitable for investors who are seeking*:  Medium term savings  A debt scheme that invests in debt and money market instruments with a view to maximize 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 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

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Riskometers 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. *Investors should consult their financial advisers if in doubt about whether the product is suitable for them ICICI Prudential Short Term Fund 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 All Seasons Bond Fund is suitable for investors who are seeking*:  All duration savings  A debt scheme that invests in debt and money market instruments with a view to maximize 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

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

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Riskometers ICICI Prudential Floating Interest Fund is suitable for investors who are seeking*:  Short term savings  An open ended debt scheme predominantly investing in floating rate instruments *Investors should consult their financial advisers if in doubt about whether the product is suitable for them

ICICI Prudential Ultra Short Term Fund is suitable for investors who are seeking*:  Short term regular income  An open ended ultra-short term debt scheme investing in a range of debt and money market instruments *Investors should consult their financial advisers if in doubt about whether the product is suitable for them 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. *Investors should consult their financial advisers if in doubt about whether the product is suitable for them The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

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Riskometers ICICI Prudential India Opportunities Fund (The scheme is suitable for investors who are seeking*)

 Long term wealth creation  An equity scheme that invests in stocks based on special situations theme. *Investors should consult their financial advisors if in doubt about whether the product is suitable for them.

ICICI Prudential Infrastructure Fund is suitable for investors who are seeking:*

 Long term wealth creation An open-ended equity Scheme that aims for growth by primarily investing in companies belonging to infrastructure and allied sectors

*Investors should consult their financial advisors if in doubt about whether the product is suitable for them. ICICI Prudential Banking & Financial Services Fund is suitable for investors who are seeking:*

 Long term wealth creation An open-ended equity Scheme that that predominantly invests in equity and equity related securities of companies engaged in banking and financial services *Investors should consult their financial advisors if in doubt about whether the product is suitable for them.

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

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Riskometers

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. *Investors should consult their financial advisers if in doubt about whether the product is suitable for them

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. *Investors should consult their financial advisers if in doubt about whether the product is suitable for them

ICICI Prudential US Bluechip Equity Fund 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 The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

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Disclaimer For Mutual Funds

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. Past Performance may or may not be sustained in future. 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. The stock(s)/sector(s) mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in this stock(s). 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 or investment advice. The recipient alone shall be fully responsible/are liable for any decision taken on this material.

The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

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Solution to the Puzzle - "The Theme for the Investment Outlook 2019” C

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equity indicators entering the moderate zone, we believe investing is now in the

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The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors of ICICI Prudential Asset Management Company & should not be circulated to investors/prospective investors.

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