Mahindra Manulife Mutual Fund | Newsletter

The Cornerstone

The new Finance Minister chose fiscal prudence and kept the fiscal deficit numbers close to the interim budget at around 3.30 percent of the GDP. Yet we believe there were some big and bold reforms announced:

The adherence to fiscal prudence
Sovereign borrowing outside India through foreign sovereign bonds
A First Loss Default guarantee of 10 percent provided by the Government for purchase for 6 months for highly rated pools of Non-Banking Finance Companies (NBFC) to PSU Banks
A reassertion that NBFCs that are fundamentally sound should get funding from Banks and Mutual Funds
Regulatory authority of Housing Finance Companies to be moved to RBI
Recapitalization of PSU banks

The move to borrowing from external sources can potentially lower the domestic borrowing costs of the government and may have a second round effect on lowering the borrowing costs for corporates. While the move to initiate sovereign borrowings expands the investor pool, it will require a measured tread on economic management.

The other move which is also relevant is the Finance Ministers alluding to the role and importance of NBFC in the credit system and accepting that a problem exists and it is being looked at. This is important for calming down the frayed nerves existing amongst investors.

The Other Bricks

Expanding minimum public shareholding in listed companies from 25% to 35%
Disinvestment target set at INR 1005 billion
Corporate Tax of 25 percent for firms with turnover up to INR 4 billion
Increase in excise of INR 2 per liter on petrol and diesel
Enhancing the income tax limit on housing loan interest from INR 2 lacs to 3.50 lacs for house valued upto INR 45 lacs: a push towards affordable housing
A push towards Electric Vehicles(EVs) by allowing a deduction of INR 1.50 lacs for interest paid on buying EVs

What Next for the Markets

Debt Markets

We have been of the opinion for a long time now that interest rates should have a lower trajectory. An adherence to the fiscal deficit may also prompt the RBI to initiate cuts in the Repo Rate helping the benign interest rate environment. We may also see possible contraction in NBFC spreads going ahead.

Scheme Strategy - Debt schemes

Mahindra Low Duration Bachat Yojana
- The average maturity increased marginally to around 331days in June
- As the possibility of RBI infusing liquidity increases, we would continue to be at the higher end of the average maturity
Mahindra 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
Mahindra Credit Risk Yojana
- We constructed a portfolio with a mix of AAA, AA and A+ rated papers
- The Modified Duration of the portfolio increased to around 1.90
- We will continue to take tactical approaches to duration in the future
Mahindra Dhan Sanchay Equity Savings Yojana –Debt
Debt
- The Modified duration of the portfolio increased to around 4.40
- We will gradually make the asset allocation between gilts and credits equal as our strategy of credits over gilt has largely played out

Scheme Specific Strategies For Equity Schemes

Mahindra Dhan Sanchay Equity Savings Yojana:

Equity:

The approach of the portfolio would be to minimize the volatility and provide steady returns. The portfolio may have a large cap bias that focusses on growth stocks having reasonable valuations and value stocks having a near to medium term trigger.
Mahindra Unnati Emerging Business Yojana:

This scheme among other things would aim to invest in companies that have a strong product line and leadership position in that sector and that can take advantage of the India’s growth story. The portfolio will focus on mid cap stocks 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, depending on market conditions.
Mahindra Mutual Fund Kar Bachat Yojana:

The portfolio will have 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 Mutual Fund Badhat Yojana:

The scheme looks to invest in companies having one or more of the following attributes - high growth runway, robust return profile with well-established business moats and/or strong earnings visibility. The scheme would look to benefit from improving outlook for capex in the country as also widening of the consumption basket. Reduction in corporate asset quality challenges is another theme that the portfolio would look to benefit from.
Mahindra Rural Bharat and Consumption Yojana:

The portfolio is a focused portfolio with around 28 stocks. The aim of the portfolio is to have a rural bias and look for opportunities in rural consumption, rural infrastructure and rural lending.
Mahindra Pragati Blue Chip Yojana:

The portfolio is a focused portfolio with around 24 stocks. 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

Webcast

Equity Market Outlook

Debt Market Outlook

Scheme Name	Product Suitability	Riskometer
Mahindra Liquid Fund An Open Ended Liquid scheme	*This Product is suitable for investors who are seeking:** Regular income over short term Investment in money market and debt instruments
Mahindra Low Duration Bachat Yojana An open ended debt scheme - 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 page 29 of SID)	*This Product is suitable for investors who are seeking:** Regular income over short term Investment in debt and money market instruments
Mahindra Credit Risk Yojana An open ended debt scheme predominantly investing in AA and below rated corporate bonds (excluding AA+ rated corporate bonds)	*This Product is suitable for investors who are seeking:** To generate regular returns and capital appreciation over medium term. Investment predominantly in AA and below rated corporate bonds, debt, government securities and money market instruments while maintaining the optimum balance of yield, safety and liquidity.
Mahindra Mutual Fund Kar Bachat Yojana An open ended equity linked saving 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
Mahindra Dhan Sanchay Equity Savings 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
Mahindra Mutual Fund 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.
Mahindra Unnati Emerging Business 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.
Mahindra Pragati Bluechip 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.
Mahindra 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
Mahindra Rural Bharat Consumption Yojana An open ended 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

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] (Mahindra 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 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 of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. Neither Mahindra Mutual Fund, Mahindra 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.

Cno. 00589

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