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Equity Markets

We present a summary of changes in key Indian & Global equity indices


 Nifty 50 Nifty Midcap 100 Nifty Small Cap 100 Dow Jones Indus. S&P 500 Index Nasdaq Composite
1 Mth Performance 4.0% 5.2% 6.0% 2.3% 3.6% 3.4%
1 Yr Performance 18.9% 25.3% 28.6% 5.1% 14.0% 7.4%

Source: Bloomberg: Data as on March 31st, 2022

Indian markets continued to witness flows from domestic investors and global investors moving in the opposite directions. While FPIs continued their selling pressure, retail investors remained aggressive buyers both directly as well as vis domestic institutions. Sector-wise, Commodities, IT, Energy, Pharma, Realty etc outperformed markets while Financials & FMCG underperformed.

Globally, the financial markets remain influenced by Russia-Ukraine conflict and US Fed’s policy actions. The conflict has created shortage of multiple commodities; due to lack of exports by Ukraine and sanctions imposed on Russia by US and EU. Global trade flows reflect a significant dependence on Russia and/or Ukraine for their agriculture exports, as well as industrial commodities ranging from Wheat, Fertilizers, Oil, Gas, Industrial Metals etc. As an immediate impact, prices of almost all these items have shot up significantly. This is likely to result in demand contraction as many products could end up being unaffordable or unviable for users at the elevated prices. On the other hand, US Fed announced a slightly aggressive roadmap for rate hike. This is clearly a negative surprise for financial markets and asset valuations may need to readjust to the same. US Fed has shown a tough resolve to tackle inflation as their own estimates of inflation being transitory has not been validated in the last 12 months. The Fed action amidst Ukraine conflict is clearly a negative for world economy.

On economic front, another unexpected event news flow has been new lockdowns in China as a response to Covid-19 resurgence. The lockdowns would hurt China’s economic growth and in turn world economy, which is already impacted by higher commodity prices.

Indian economy too, is seeing some early impact of higher commodity prices. India’s energy import dependency is high and hence rising prices of oil, gas and coal are a big dampener on macro-economic (currency, inflation, fiscal deficit etc), as well as micro (corporate profitability) front. Retail prices of petrol and diesel have started rising since last week of March on a gradual basis. The real impact of higher crude on inflation and consumption would be felt going ahead.

Looking Ahead

The quick resolution to Russia-Ukraine conflict and sanctions on Russia has become pre-dominant variables for global economic stability and also for financial markets. Globally, the markets have surprised by showing a reasonable resilience amidst multiple negatives. However, with the US Fed policy on the path of tightening, it doesn’t allow too much room for exuberance as economic growth outlook is being revised downwards. The prices of commodities reflect a real risk of demand deferral and hence a slowdown.

For Indian economy and corporates too, the revised scenario has relevant implications. Q4FY23 results may show margin pressures across industries as commodity prices start hurting. The real impact is however likely to be felt in Q1FY23 unless there is a sudden reversal in commodity prices. While, India’s tax collection growth remains impressive, it is led more by compliance and/or prices-led rather than volume-led (growth-led). Amidst the uncertainties, our investment approach remains focussed on quality companies, who are market leaders in their respective industries having a least leveraged balance-sheets and some pricing power for their products. Challenge to Indian markets is partly coming from relative valuations vis-a-vis other emerging markets and that’s where we are seeing a sizeable selling by FPIs, especially in last 6 months.

Asset allocation to equities creates wealth over long-term as growth rewards equity assets. Growth outlook turns volatile at various times due to multiple factors. History has shown that equity assets acquired during volatile times deliver better returns over longer-term. We recommend

    1. Conservative investors may continue to use systematic investment route and avoid the market timing worries.
    2. Aggressive investors may attempt market timing via lumpsum investments.
    3. Balance investors use “Balanced Advantage route”. This allows fund managers the flexibility of shifting asset allocation and time the market during volatility.




Scheme Specific Strategies for Equity Schemes
  • Mahindra Manulife Multi Cap Badhat Yojana
  • Mahindra Manulife Mid Cap Unnati Yojana
    • This scheme would aim to invest in companies that demonstrate higher earnings growth outlook , potential of rerating or sectoral leadership position which can take advantage of the India’s growth story. The portfolio will investing in predominantly mid-cap stocks (>65%) apart from some exposure to small and large-cap stocks. The portfolio will have a mix of top-down and bottom-up approach to investing.
  • Mahindra Manulife ELSS Kar Bachat Yojana
    • The portfolio has allocation to stocks across market capitalization and may focus on companies that have the power to take advantage of the opportunities the economy offers. The stocks in the portfolio are likely to have a superior product line, manageable debt and leadership in their respective sectors.
  • Mahindra Manulife Rural Bharat and Consumption Yojana
    • The portfolio is a concentrated portfolio and aims to have a rural bias and look for opportunities in rural consumption, rural infrastructure and rural lending.
  • Mahindra Manulife Large Cap Pragati Yojana
    • The portfolio is a concentrated portfolio with a top-down approach would be adopted to identify sectors with potential across different periods based on emerging macro trends. In addition, a bottom-up stock selection would also be followed, to identify companies with good governance and strong leadership.
  • Mahindra Manulife Top 250 Nivesh Yojana
    • The scheme focusses on investing in companies that have demonstrated strong leadership and sustained growth and continue to do so. The portfolio currently has around 52%,36% and 8% of net equity holdings in large, mid and small cap respectively.
  • Mahindra Manulife Focused Equity Yojana
    • The Scheme focuses on maintaining an appropriate diversified portfolio of companies with a medium term perspective. The Scheme follows a top down approach to select sectors and a bottom up approach to pick stocks across the sectors based on the quality of business model and quality of management. Quality of business model and quality of management will be assessed by evaluating past track record and/or future outlook. The selection of companies will be guided by a combination of one or more factors like:
      1. Growth opportunities.
      2. Cash flows generated and ability to finance the growth.
      3. Management quality to deliver the growth
Scheme Specific Strategies for Hybrid Schemes
  • Mahindra Manulife Equity Savings Dhan Sanchay Yojana

    Equity:

    • Portfolio composition would have preference for growth style of investing.
    • Bottom-up approach would be adopted to identify companies that have ability to scale up, gain market share and/or are present in sunrise/high growth sectors.


    Debt:

    • The Modified duration of the portfolio has decreased to 1.40 for the debt portion.
    • The allocation at the moment has larger allocation towards short tenor quality credits but we intend to have an equal allocation between credits and gilts as we move ahead.
  • Mahindra Manulife Hybrid Equity Nivesh Yojana

    Equity:

    • Portfolio composition would have preference for growth style of investing.
    • Bottom-up approach would be adopted to identify companies that have ability to scale up, gain market share and/or are present in sunrise/high growth sectors.


    Debt:

    • The Modified duration of the portfolio is around 2.30 years for the debt portion.
    • We have now a larger allocation to gilts than credits and may maintain this stance in the near future.
  • Mahindra Manulife Balanced Advantage Yojana

    Equity:

    • Portfolio composition would have preference for growth style of investing with large cap bias.
    • Bottom-up approach would be adopted to identify companies that have ability to scale up, gain market share and/or are present in sunrise/high growth sectors.


    Debt:

    • The Modified duration of the portfolio is around 1.60 years for the debt portion.
    • The duration is built through exposure in 10-year gilt and moving ahead we may diversify the duration through exposure to the 5-year gilt segment.
What should an investor do?
For investments in equity oriented products:

  • Our view is that volatility may continue and SIP may be a good way to increase equity market allocations
  • Investors looking to invest for a medium to long period, can consider SIPs or STPs into focused, multicap or hybrid funds based on risk appetite.
  • Investors looking for a better return opportunity and with a suitable risk appetite, may consider part allocation in mid cap fund as well.
Bond And Money Market

We present a matrix detailing movement in few key market rates (domestic and global) and key events

Parameters 31st March 22 28th February 22 31st March 21
RBI Repo Rate % 4.00 4.00 4.00
5Y AAA PSU % 6.30 6.36 6.14
1 year CD % 4.71 4.90 4.38
10Y Gsec % 6.84 6.77 6.17
CPI (%) 6.04 6.01 5.03
IIP (YoY) % 1.32 0.44 -1.6
US 10Y % 2.34 1.83 1.74
Dollar Rupee 75.79 75.34 73.11

Source: Bloomberg: Data as on March 31st, 2022

It was a month of contradictions: whilst the Gilt yields moved up reflecting the rising global yields, domestic AAA credits saw yields moving down across the tenor, reflecting specific buying by the provident funds. The AAA credit spreads of certain quasi-sovereign entities have dropped or are at a minimal spread to the respective sovereign yields and represent a rare and outlier event in the Indian debt market. While the Yields of Government of India’s debt securities moved up by around 7-10 bps across the segments, the AAA credit yields fell by around 5-10 bps resulting in compressed AAA credit spreads. The developed market sovereign yields also moved by with the US Ten-year gilt, moving up by around 50 bps to close at 2.34%. What really intrigued the markets was the steep rise in the US 2-year Gilt rates and the flattening /reversion of the US yield curve, implying a potential recessionary condition in the US economy. Money market yields domestically softened, with domestic mutual fund deploying their surpluses for the financial year-end.

Looking Ahead
  • The MPC meets in the first week of April for the Bimonthly Monetary policy. The previous MPC meet stance had a dovish drift. However, considering the extant inflationary situation, the MPC may be prompted to move from an accommodative to a neutral stance. While domestic private consumption remains sluggish, a persistent commodity inflation may tie RBI’s hand and possibly change the RBI’s stance.
  • The present situation of Russia-Ukraine conflict presents an interesting situation. While uncertainty presented due to the conflict may make some global central bankers to possibly slow a rate-rise signal, a possible persistent commodity inflation would complicate policy decisions.
  • While we continue to remain apprehensive of a rate rise as we move through the year, we believe the first half of the next financial year may mark the terminal value of the rate rise phenomenon.
  • While the possibility of a bear flattening of the yield curve exists with long term rates rising lesser than short term rates, the recent GoI borrowing calendar possibly defers the event as the borrowing calendar looks skewed on the longer-end.
  • We also believe that AAA credit spreads are very tight and the probability of spreads to increase in the near future remains a distinct possibility
  • Liquidity being gradually sterilized through VRRR, the extreme short-end of the yield curve may also remain under pressure.
What should an investor do?

  • We believe that investors with a shorter time-horizon of less than one year, may continue investments in ultra-short term and low duration funds.
  • Short term fund category may be suitable for investors looking to stay for a time horizon beyond one year with a lower risk volatility.
  • For a long investment horizon and with a suitable risk-appetite, a small allocation to Dynamic Bond fund merits attention.
Scheme Specific Strategies for Debt Schemes
  • Mahindra Manulife Low Duration Fund
    • The average maturity is around 245 days
    • The YTM of the portfolio is around 4.80%
    • With our view on G-sec offering better opportunities than Bonds, we may derive around 30% of our duration through G-secs in this fund
    • We intend to keep duration at this level
      • Potential Risk Classification (PRC)
      Potential Risk Class Matrix (Maximum risk the Scheme can take)
      Credit Risk Relatively Low (Class A) Moderate (Class B) Relatively High (Class C)
      Interest rate Risk
      Relatively Low (Class I) B-I
      Moderate (Class II)
      RelativelyHigh (Class III)
  • Mahindra Manulife Ultra Short Term Fund
    • The average maturity of the portfolio increased to around 146 days
    • We will gradually reduce the maturity as we move ahead through the next month
    • The YTM of the portfolio is around 4.54%
      • Potential Risk Classification (PRC)
      Potential Risk Class Matrix (Maximum risk the Scheme can take)
      Credit Risk Relatively Low (Class A) Moderate (Class B) Relatively High (Class C)
      Interest rate Risk
      Relatively Low (Class I) B-I
      Moderate (Class II)
      Relatively High (Class III)
  • Mahindra Manulife Liquid Fund
    • We continue to maintain a healthy mix of certificate of deposits and commercial papers
    • We will attempt to ensure adequate liquidity, safety and accrual
      • Potential Risk Classification (PRC)
      Potential Risk Class Matrix (Maximum risk the Scheme can take)
      Credit Risk Relatively Low (Class A) Moderate (Class B) Relatively High (Class C)
      Interest rate Risk
      Relatively Low (Class I) B-I
      Moderate (Class II)
      Relatively High (Class III)
  • Mahindra Manulife Dynamic Bond Yojana
    • The YTM of the portfolio is around 5.43%.
    • The Modified Duration of the portfolio (MD) decreased to around 3 years
    • While we derive around a large portion of our duration through our exposure to longer-dated gilts, we may replace it with an equal duration through medium-tenored Gsec.
      • Potential Risk Classification (PRC)
      Potential Risk Class Matrix (Maximum risk the Scheme can take)
      Credit Risk Relatively Low (Class A) Moderate (Class B) Relatively High (Class C)
      Interest rate Risk
      Relatively Low (Class I)
      Moderate (Class II)
      Relatively High (Class III) B-III
  • Mahindra Manulife Short Term Fund
    • The YTM of the portfolio is around 5.33%
    • The Modified duration of the portfolio is around 1.50 years
    • Our portfolio continues to have a large allocation towards gilts as we are wary of the spreads increasing in AAA credits
      • Potential Risk Classification (PRC)
      Potential Risk Class Matrix (Maximum risk the Scheme can take)
      Credit Risk Relatively Low (Class A) Moderate (Class B) Relatively High (Class C)
      Interest rate Risk
      Relatively Low (Class I)
      Moderate (Class II) B-II
      Relatively High (Class III)

Scheme Name Product Suitability Scheme Riskometer Scheme Benchmark Benchmark Riskometers
Mahindra Manulife Multi Cap Badhat Yojana
(Multi Cap Fund - An open-ended equity scheme investing across large cap,mid cap, small cap stocks.)
This Product is suitable for investors who are seeking*:
  • Medium to Long term capital appreciation.
  • Investment predominantly in equity and equity related securities including derivatives.
  • Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Investors understands that their principal will be at Very High risk
 Nifty 500 Multicap 50:25:25 Index TRI
Mahindra Manulife Mid Cap Unnati Yojana
(Mid Cap Fund – An open ended equity scheme predominantly investing in mid cap stocks)
This Product is suitable for investors who are seeking*:
  • Long term capital appreciation.
  • Investment predominantly in equity and equity related securities including derivatives of mid cap companies.
  • Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Investors understands that their principal will be at Very High risk
 Nifty Midcap 150 TRI
Mahindra Manulife ELSS Kar Bachat Yojana
(An open ended equity linked savings scheme with a statutory lock in of 3 years and tax benefit)
This Product is suitable for investors who are seeking*:
  • Long term capital appreciation
  • Investment predominantly in equity and equity related securities.
  • Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Investors understands that their principal will be at Very High risk
 Nifty 500 TRI Index
Mahindra Manulife Rural Bharat and Consumption Yojana
(An open ended equity scheme following rural india theme)
This Product is suitable for investors who are seeking*:
  • Long term capital appreciation
  • Investment predominantly in equity and equity related securities including derivatives of entities engaged in and/or expected to benefit from the growth in rural India
  • Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Investors understands that their principal will be at Very High risk
 Nifty India Consumption Index TRI
Mahindra Manulife Large Cap Pragati Yojana:
(Large Cap Fund - An open ended equity scheme predominantly investing in large cap stocks)
This Product is suitable for investors who are seeking*:
  • Long term capital appreciation
  • Investment predominantly in equity and equity related securities including derivatives of large cap companies.
  • Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Investors understands that their principal will be at Very High risk
 Nifty 100 Index TRI
Mahindra Manulife Top 250 Nivesh Yojana
(Large & Mid Cap Fund- An open ended equity scheme investing in both large cap and mid cap stocks)
This Product is suitable for investors who are seeking*:
  • Long term wealth creation and income
  • Investment predominantly in equity and equity related securities of large and mid cap companies.
  • Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Investors understands that their principal will be at Very High risk
 Nifty LargeMidcap 250 Index TRI
Mahindra Manulife Focused Equity Yojana
(An open ended equity scheme investing in maximum 30 stocks across market caps (I.e Multi Cap))
This Product is suitable for investors who are seeking*:
  • Long term capital appreciation
  • Investment in equity and equity related instruments 1in concentrated portfolio of maximum 30 stocks across market capitalziation
  • Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Investors understands that their principal will be at Very High risk
 NSE 500 Index TRI
Mahindra Manulife Equity Savings Dhan Sanchay Yojana
(An open ended scheme investing in equity, arbitrage and debt)
This Product is suitable for investors who are seeking*:
  • Long term capital appreciation and generation of income
  • Investment in equity and equity related instruments, arbitrage opportunities and debt and money market instruments.
  • Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Investors understands that their principal will be at Moderately high risk
 Nifty Equity Savings Index TRI
Mahindra Manulife Hybrid Equity Nivesh Yojana
(An open ended hybrid scheme investing predominantly in equity and equity related instruments)
This Product is suitable for investors who are seeking*:
  • Long term capital appreciation and generation of income.
  • Investment in equity and equity related instruments and debt and money market instruments.
  • Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Investors understands that their principal will be at Very high risk
 CRISIL Hybrid 35+65 Aggressive Index
Mahindra Manulife Balanced Advantage Yojana
(An open ended dynamic asset allocation fund)
This Product is suitable for investors who are seeking*:
  • Capital Appreciation while generating income over medium to long term.
  • Investments in a dynamically managed portfolio of equity and equity related instruments and debt and money market instruments.
  • Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Investors understand that their principal will be at moderately high risk
 Nifty 50 Hybrid Composite Debt 50: 50 Index TR
Mahindra Manulife Low Duration Fund
(An open ended low duration debt scheme investing in instruments such that the Macaulay duration of the Portfolio is between 6 months and 12 months. A relatively low interest rate risk and moderate credit risk)
This Product is suitable for investors who are seeking*:
  • Regular Income over short term.
  • Investment in debt and money market instruments.
  • Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Investors understands that their principal will be at Moderate risk
 CRISIL Low Duration Debt Index
Mahindra Manulife 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 to 6 months. A relatively low interest rate risk and moderate credit risk)
This Product is suitable for investors who are seeking*:
  • Regular Income over short term.
  • Investment in a portfolio of short term debt and money market instruments
  • Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Investors understands that their principal will be at Moderate risk
 CRISIL Ultra Short Term Debt Index
Mahindra Manulife Liquid Fund
(An open ended liquid scheme. A relatively low interest rate risk and moderate credit risk)
This Product is suitable for investors who are seeking*:
  • Regular income over short term
  • Investment in money market and debt instruments
  • Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Investors understands that their principal will be at Low to Moderate risk
 CRISIL Liquid Fund Index
Mahindra Manulife Dynamic Bond Yojana
(An open ended dynamic debt scheme investing across duration. A relatively high interest rate risk and moderate credit risk)
This Product is suitable for investors who are seeking*:
  • To generate regular returns and capital appreciation through active management of portfolio.
  • Investments in debt & money market instruments across duration.
  • Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Investors understands that their principal will be at Moderate risk
 CRISIL Composite Bond Fund Index
Mahindra Manulife 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. A moderate interest rate risk and moderate credit risk)
This Product is suitable for investors who are seeking*:
  • Income over short to medium term
  • Investment in debt and money market instruments.
  • Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Investors understands that their principal will be at Moderate risk
 CRISIL Short Term Bond Fund Index
Disclaimer

The views expressed here in this material are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. No representation or warranty is made as to the accuracy, completeness or fairness of the information and opinions contained herein. The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any Financial product or instrument or mutual fund units for the reader. This material has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. While utmost care has been exercised while preparing this material, Mahindra Manulife Investment Management Private Limited (formerly known as Mahindra Asset Management Company Private Limited) (AMC) does not warrant the completeness or accuracy of the information and disclaimers all liabilities, losses and damages arising out of the use of this information. The data/statistics given in this material are to explain general market trends in the securities market, it should not be construed as any research report/research recommendation. Readers of this material should rely on information / data arising out o their own investigations and advised to seek independent professional advise and arrive at an informed decision before making any investments. Neither Mahindra Manulife Mutual Fund, the AMC nor Mahindra Manulife Trustee Private Limited (formerly known as Mahindra Trustee Company Private Limited), its directors or associates shall be liable for any damages that may arise from the use of the information contained herein.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.