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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. Avg S&P 500 Index Nasdaq Composite Index
1 Mth Performance -4.8% -6.5% -8.3% -6.7% -8.4% -8.7%
1 Yr Performance 0.4% -1.9% -13.2% -10.8% -11.9% -24.0%

Source: Bloomberg: Data as on June 30th, 2022

Indian markets continue to witness volatility with a downward bias. The economic indicators turning weaker as the Russia-Ukraine war continues, hurting businesses and sentiments across. From flow perspective too, contrary behavior between domestic investors and global investors remains. The trend of FPI selling and domestic investors being buyers both directly as well as via domestic institutions also continues. Broad markets were down with a wide gap in sectoral performances. Sector wise, Auto, FMCG, Pharma & Energy outperformed while IT, Metals, Financials & Realty underperformed Nifty. Global markets too were weak, with Nifty outperforming many markets.

Indian economy was 14th in CY2006 and has moved to 7th in CY2021. We have experienced the economic growth and wealth creation associated with the growth in this journey from 2006 to 2021. The broad journey of India among global economy remains on track from 7th rank at present, towards 3rd rank expected in this decade. We can expect a similar growth in economy and wealth creation over medium to long term, despite the near-term challenges posed by War, Inflation & global monetary policy.

RBI at its meeting announced rate hike as well as signaled further tightening to control inflation. For policymakers, it is a challenge to be able to support growth and control inflation, simultaneously. Some actions like imposing restriction on exports can help in a way, but for some products it may not be possible to absorb the exports volume in domestic economy. In such case, the real impact can be felt on corporate profitability. Economy-wise, RBI maintained its expectations of 7.2% growth for FY23. While this remains the base case, any deceleration in global economy can hurt as exports get impacted. Also, higher imports for energy (oil, gas & coal) would hurt GDP in addition to inflation.

Globally, the key issues facing economy & financial markets remains same. Monetary tightening, Russia-Ukraine war & China Covid policy. US Fed turned more aggressive in its path towards policy tightening with a 75 bps rate hike, as well as guidance for more hikes in CY22. Month-end reports indicated a resumption towards normalcy in China and this can perhaps address the supply constrained inflation. The Russia-Ukraine war continues with worsening financial implications for inflation, global growth and markets.

Looking Ahead

A resolution to geopolitical stalemate on Russia-Ukraine conflict remains a primary variable while post-Covid opening up in China is also required. US Fed policy normalization is hurting asset valuations, especially in overvalued businesses where long-term vision was useful in justifying valuations. Globally, the key risk in equity markets is the reversal of the high valuations as the US Fed moves ahead on the tightening path.

For Indian economy and corporates too, the implications are similar. High inflation usually creates margin pressure & demand contraction. Normally the earnings estimates get downgraded in such environment. The management commentary in the Q1FY23 result season would offer a pointer for next 2 quarters. Amidst the uncertainties, our investment approach remains focussed on quality companies that are market leaders in their respective industries with low leveraged balance sheets and some pricing power for their products. Challenge to Indian markets remains the sizable selling by FPIs since October 2021. An interesting observation has been that Indian markets have continued to outperform many global markets despite this selling.

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 continue to use systematic investment route and avoid the market timing worries.
    2. Aggressive investors can 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 Strategy - 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 Flexi Cap Yojana
    • The Scheme follows top down sector allocation and bottom up stock selection ideas that may benefit based on health of economy. Allocation across marketcaps is a function of economic outlook, domestic liquidity and stage of market cycle. Focus will be on high quality, growth focussed companies available at reasonable valuations.
  • 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 earnings growth potential, strong balance sheet and good governance.
  • 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 53%,38% and 5% 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.
  • Mahindra Manulife Hybrid Equity Nivesh Yojana

    Equity:

    • Macro theme of the portfolio will be to identify the status of economy and ivest in sectors with potential to outperform.
    • Portfolio composition would have preference for companies with potential for earnings upgrade and possible valuation upgrades as well.   


    Debt:

    • The Modified duration of the portfolio is around 2.60 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 2.86 years for the debt portion.
    • The duration is built through exposure in 10-year/5-year Gilt.
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 30th June 22 31st May 22 30th June 21
RBI Repo Rate % 4.90 4.40 4.00
5Y AAA PSU % 7.57 7.43 6.40
1 year CD % 6.53 6.29 4.16
10Y Gsec % 7.45 7.42 6.05
CPI (%) 7.04 7.79 6.30
IIP (YoY) % 7.14 1.85 134.44
US 10Y % 3.01 2.84 1.47
Dollar Rupee 78.97 77.64 74.33

Source: Bloomberg; Data as on June 30th, 2022

A month when the MPC met yet again; and raised repo rates by 50 basis points to 4.90 %, an action which the street was expecting. The MPC raised its full year inflation forecast to 6.70% and retained the full year real GDP growth forecast to 7.20%. The markets drew a large comfort from the fact that the MPC had raised inflation projections to a level which looked realistic. The MPC also talked about remaining focused towards withdrawal of accommodation while supporting growth. A reading of the minutes of the MPC released later in the month too provided the markets a sense of comfort as the tone of the committee members did not betray extreme hawkishness undertone. The US Fed too raised rates by 75 bps to a range between 1.50%-1.75%. Inflation released for the month of May was printed at 7.04%, mostly in line with the market expectations.

It was a stable debt market through the month: the benchmark 10 year and 5 year Gsec rose by around 5 bps to close at around 7.45% and 7.25%, respectively. With gradual withdrawal of accommodation, the pressure was mostly felt in the shorter-end of the yield curve, with rates upto the 1-year segment moving up by around 25-30 bps.

Looking Ahead
  • While we continue to remain apprehensive of a rate rise as we move through the year we believe the first half of the current financial year may mark the terminal value of the rate rise phenomenon. With commodity prices, barring crude, softening through the past 3 months; we believe a sustained commodity slowdown will provide a respite to the retail inflation
  • The possibility of a bear flattening of the yield curve specially in the 1-5 year segment remains high with the start of the rate hike cycle
  • 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 normalized, the extreme short end of the yield curve may also remain under pressure
What should an investor do?

  • We believe that the 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 strategy – Debt Schemes
  • Mahindra Manulife Low Duration Fund
    • The average maturity is around 234 days
    • The YTM of the portfolio is increased to 6.25 %
    • With our view on Gsec possibly offering better opportunities than Bonds, we derive around 30% of our duration through Gsecs in this fund
    • We would remain skewed in this duration range as the RBI has started the hike cycle
      • 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 decreased to around 126 days
    • We will remain in this maturity segment as we move ahead through the next month
    • The YTM of the portfolio is around 6.04 %
      • 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 has is around 6.80 %
    • The Modified Duration of the portfolio (MD) decreased to around 2.80 Years
    • The Portfolio largely derives it duration from Gilts as we believe that the AAA credit spreads may expand as we move ahead
      • 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 6.64 %
    • The Modified duration of the portfolio is around 1.62 Years
    • Our portfolio continues to have a large allocation towards gilts, accounting for around 50% of the duration 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 Flexi Cap Yojana
(An open ended dynamic equity scheme investing across large cap, mid cap, small cap stocks)
This Product is suitable for investors who are seeking*:
  • Long term capital appreciation
  • Investment in diversified portfolio of equity & equity related instruments across market capitalization
  • 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 Very High risk
 Nifty 500 Index TRI
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 in 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 TRI
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(please refer to page no. 33 of SID). 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 Fund BI 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(please refer to page no. 31 of SID). 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 understand that their principal will be at Moderate risk
 CRISIL Ultra Short Duration Fund BI 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 BI 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 Dynamic Bond Fund BIII 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(please refer to page no. 36 of SID). 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 Duration Fund BII Index
Disclaimer

The views expressed here in this document 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 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 document 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 document, 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 disclaims all liabilities, losses and damages arising out of the use of this information. The data/statistics given in the document are to explain general market trends in the securities market, it should not be construed as any research report/research recommendation. Readers of this document should rely on information /data arising out of their own investigations and advised to seek independent professional advice 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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Cno.1277

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