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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
1 Mth Performance -3.1% -6.8% -11.4% -3.5% -3.1% -3.4%
1 Yr Performance 15.6% 21.3% 22.3% 9.6% 14.8% 4.2%

Source: Bloomberg: Dated 28th February, 2022

Last month saw continued selling pressure by FPIs. The pace of selling is quite unusual when looking at it over longer-term trends. The markets continue to see good participation by domestic investors (direct retail participation, as well as through mutual funds). Sector-wise, Energy, Auto, Banks & Financials, Commodities outperformed markets while IT, FMCG, Pharma underperformed.

Globally, the worries over monetary tightening by US Fed took a backseat as geopolitics took over as key risk to global economy. The political tussle between Russia and Ukraine took an ugly turn into a military war. The military war in turn spurred an economic and financial war with sanctions imposed on Russia by USA and countries in Europe. With Russia and Ukraine being relevant players in many commodities – oil, coal, natural gas, aluminum, wheat etc, there has been a surge in prices of many of these commodities. This price surge is likely to escalate the inflationary impact on world economy.

US Fed policy action remained relevant as Fed held an emergency meeting on February 14th. However, the details of the meeting have not been shared. So, we need to wait till mid-March for the next meeting to evaluate the policy stance. While worries over inflation remain relevant, the issues arising from Russia-Ukraine conflict may create a window for some delayed tightening vis-a-vis the expectations.

In India’s context, GDP data for Q3FY22 was released. While GDP growth in Q3FY22 softened, momentum remained steady driven by manufacturing, construction and financial/real estate sectors. The variables impacting growth are showing mixed signals. While private investment cycle is expected to lead growth along with pick-up in service sector post the Covid-wave, worries over falling consumption and global demand as well as supply constraints are likely to impact growth rates. However, the single most relevant factor for Indian economy and markets could well be the energy (Oil and Coal) prices. If energy prices are to sustain around current levels, we could see reasonable macro-economic implications on current account, inflation, interest rates, currency and GDP growth.

Looking Ahead

The quick resolution to Russia-Ukraine conflict as well as the sanctions on Russia have become pre-dominant variables for global financial markets. The pace of US Fed policy action has partially become dependent on the resolution. The inflationary dynamics of energy and commodity markets do not allow any room for error or even an elongated conflict time.

For Indian economy and corporates too, the energy and commodity prices have significant implications. Q3FY22 results have already shown margin pressures across industries. The hope really is that volumes may not disappoint and hence corporate India may continue to deliver earning growth. It is difficult to prepare for a war kind of situation in any portfolio construct as neither the event nor its duration is possible to anticipate. Spike in basic commodities and energy prices does change profitability for many user industries and a reversal post-the resolution may be equally sharp. The better approach remains to be focussed on quality companies who are market leaders in their respective industries, with least leveraged balance sheets and some pricing power for their products. As the dust settles over war-led disruption, it may be back to economy and corporate earnings to drive markets. Challenge to Indian markets is partly coming from relative valuations vis-a-vis other emerging markets and that is what is contributing to sizeable selling by FPIs in last 6 months.

Asset allocation usually acts as a good anchor to investment discipline. We continue to believe in the current environment, the focus should be on asset allocation, especially for those investors who have a shorter time-frame in mind. For investors with longer time-frame, remaining invested may be preferred strategy.

Investors who prefer lumpsum investing could have an asset allocation strategy (equity as a percentage of portfolio) to try and benefit from greed and fear phases. Alternately, the strategy could be to really to stick to longer term outlook rather than focussing on 1-2 years of volatility. However, for investors with SIP investment strategy such phases are not so relevant as the investor is still in accumulation phase for wealth creation over the 5-7 years. SIP may be a good alternative to avoid the behavioural traps during the extreme phases of markets. We maintain that investors may use SIP as part of core investment philosophy and use the lumpsum route during the extreme phases to top-up on their SIPs when there is volatility amid fearful times.






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 invest predominantly in 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. 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 years 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
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 28th February 22 31st January 22 28th February 21
RBI Repo Rate % 4.00 4.00 4.00
5Y AAA PSU % 6.36 6.35 6.01
1 year CD % 4.90 4.83 4.25
10Y Gsec % 6.77 6.68 6.23
CPI (%) 6.01 5.59 4.06
IIP (YoY) % 0.44 1.42 1.56
US 10Y % 1.83 1.78 1.40
Dollar Rupee 75.34 74.62 73.46

Source: Bloomberg: Dated 28th February, 2022

Last month started with the budget presenting a larger than expected Central Government borrowing leading to an initial sell-off in G-secs with the benchmark ten-year gilts moving up to touch a high (intraday) of 6.95% during the month. However, the subsequent MPC policy saw an extremely dovish RBI as they did not change any benchmark policy rates and projected an average inflation number of 4.50% through the next financial year. Such dovish policy triggered a relief rally which got halted as crude prices started inching up due to the Ukrainian conflict. The benchmark ten-year gilt closed at 6.77% inching up by around 10 bps through the volatile month. The short-term rates remained benign as the systemic liquidity continued to remain high.

Looking Ahead
  • The present situation of 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.
  • With its continued focus on increasing the amounts under Variable Reverse Repo rate auctions (VRRR), RBI is attempting to normalize the shorter-end rates in a possibly non-disruptive fashion.
  • 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.
  • The possibility of a bear flattening of the yield curve exists with long-term rates rising lesser than short-term rates
  • 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 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 245 days
    • The YTM of the portfolio is around 4.60%
    • 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 110 days
    • We will maintain the maturity as we move ahead through the next month
    • The YTM of the portfolio is around 4.24%
      • 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 5.40%.
    • The Modified Duration of the portfolio (MD) decreased to around 3.24 years
    • We derive around 75% of our duration through our exposure to longer dated gilts as we believe they offer a relatively higher margin of safety
      • 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 5.20%
    • The Modified duration of the portfolio is around 1.59 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 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 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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Cno.01221

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