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From the MD’s desk

The Financial year 2019 has begun on a good note for both, the equity as well as the debt markets. The equity broader market outperformed benchmarks after weakness that lasted over 14 months, the strongest indication of which is visible in the Nifty Midcap Index that logged the biggest ever monthly gains (over 9%) since March 2016. Some of the gains resulted from the FPIs’ buying, following the lowering of global bond yields. The Indian Currency is showing strength and the RBI revision of repo rates by 25 basis points is a welcome measure for boosting growth. This cut in the repo rate is expected to help sustain India's growth to 7.2 - 7.3 percent in FY20. This interest rate cut also comes at a time when global central banks are easing up on their stance on interest rates and liquidity. Although the capital investment trend remains noncommittal at the moment, we believe that all the ingredients of an economic upswing are in place. One that is much needed at the moment. The upcoming general elections find the equity markets and investors trading opportunistically i.e. not building any high risk positions for the long term, but more focused on quick profit-making.

General Election Year 6 Month Prior Held for 24 Month CAGR Nifty
1991 Dec - 90 Dec - 92 48.9%
1996 Dec - 95 Dec - 97 8.6%
1998 Nov - 97 Nov - 99 13.0%
1999 Apr - 99 Apr - 01 1.5%
2004 Nov - 03 Nov - 05 26.0%
2009 Nov - 08 Nov - 10 51.9%
2014 Nov - 13 Nov - 15 14.3%

The table above shows that regardless of the outcome of elections i.e. whether the incumbent government remains in power or if there is a change at the Centre, markets have shown no perceivable correlation to either outcome. The lesson is: you should build your goal oriented portfolio with zero regard to the election outcomes. They do not appear to have much influence on performance of long term portfolios.

So, while markets watch for trading profits, this is the right time to top up your systematic investments plan, or increase your lump sum investments in equity funds. As for Fixed Income, the corporate bond market may get ready for a good performance and any fund that is overweight on such bonds is likely to outperform. With the RBI's move for making additional liquidity available, NBFCs that have a significant share in overall credit disbursement is likely to find some ease in raising funds, and improving their own margins.

In summary, keep your eyes focused on your goals and keep investing. Best wishes and Happy Investing for the financial year 2019-20.

Mr. Ashutosh Bishnoi
MD & CEO

Data Source: Bloomberg

Bond And Money Market

We present a matrix detailing some movement in some key market rates (domestic and global) and key indicators:

Parameters 29-Mar-19 28-Feb-19 30-Mar-18
RBI Repo Rate % 6.25 6.25 6.00
5Y AAA % 8.16 8.43 7.87
5Y AAA-5Y Gsec Spread bps# 111 121 21
10Y Gsec % (old ten year) 7.35 7.41 7.40
CPI (%) 2.57 2.05 4.44
IIP (FYTD) % 4.4 4.6 4.1
US 10Y % 2.42 2.72 2.74
Japan 10Y % -0.08 -0.02 0.05
EUR 10Y % -0.06 0.18 0.49

Source: Bloomberg; Data as on March 29, 2019 | * bps - basis points | #Gilt annualized

It was an interesting month for the debt markets. As RBI announced and auctioned a 5 billion dollars 3-year swap, it possibly created a window for fresh liquidity from FPIs in the domestic corporate bond segment. And even as the benchmark 10-year gilt broadly remained stable, 5-year AAA corporate bonds moved down by around 35 bps during the month, after RBI’s announcement of the swap window.

Liquidity moved into a tighter zone in March (no surprises here) and there was a marginal uptick in the short term rates.

Globally, yields in Developed market fell with US 10-year gilt moving down by around 30 bps and Germany 10-year sovereign again slipped back into a negative yield zone.

Debt Markets

The MPC meets in the first week of April. We believe that the MPC may cut repo rates by 25-50 basis points. The continued low inflation and also a benign US Federal Reserve provides the comfort to the MPC. We continue to believe that interest rates may head lower. In recent times, corporate bond spreads have widened significantly partly reacting to a rising risk aversion in the credit markets. We think with time, as underlying gilt stabilizes, credit spreads may start normalizing, offering the investors potentially better risk reward tradeoffs.

Scheme Strategy - Debt schemes
  • Mahindra Low Duration Bachat Yojana
    • The average maturity remains stable at around 285 days in March
    • We have moved up the average maturity higher on anticipation of a possible rate cut and a neutral liquidity situation
    Riskometer
    Investor understands that their principal will be at moderately high risk.

    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.

    Fund Manager: Mr. Srinivasan Ramamurthy & Mr. Rahul Pal

    Benchmark: Composite Benchmark: 55% Nifty 50 Index + 30% Crisil Composite Bond Fund Index+15% Crisil Liquid Fund Index

    Entry Load: Not applicable

    Exit Load:

    10% of the units allotted shall be redeemed without any exit load, on or before completion of 12 months from the date of allotment of Units. Any redemption in excess of the above limit shall be subject to the following exit load;

    • An exit load of 1% is payable if Units are redeemed / switched-out on or before completion of 12 months from the date of allotment of Units;
    • Nil - If Units are redeemed / switched-out after completion of 12 months from the date of allotment of Units.
  • 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
    Riskometer
    Investor understands that their principal will be at moderately high risk.

    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.

    Fund Manager: Mr. Srinivasan Ramamurthy & Mr. Rahul Pal

    Benchmark: Composite Benchmark: 55% Nifty 50 Index + 30% Crisil Composite Bond Fund Index+15% Crisil Liquid Fund Index

    Entry Load: Not applicable

    Exit Load:

    10% of the units allotted shall be redeemed without any exit load, on or before completion of 12 months from the date of allotment of Units. Any redemption in excess of the above limit shall be subject to the following exit load;

    • An exit load of 1% is payable if Units are redeemed / switched-out on or before completion of 12 months from the date of allotment of Units;
    • Nil - If Units are redeemed / switched-out after completion of 12 months from the date of allotment of Units.
  • Mahindra Credit Risk Yojana
    • We constructed a portfolio with a mix of AAA, AA and A+ rated papers
    • The Modified Duration of the portfolio is around 1.94. We have added some NBFCs to the portfolio as we think there may be spread compressions going ahead
    Riskometer
    Investor understands that their principal will be at moderately high risk.

    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.

    Fund Manager: Mr. Srinivasan Ramamurthy & Mr. Rahul Pal

    Benchmark: Composite Benchmark: 55% Nifty 50 Index + 30% Crisil Composite Bond Fund Index+15% Crisil Liquid Fund Index

    Entry Load: Not applicable

    Exit Load:

    10% of the units allotted shall be redeemed without any exit load, on or before completion of 12 months from the date of allotment of Units. Any redemption in excess of the above limit shall be subject to the following exit load;

    • An exit load of 1% is payable if Units are redeemed / switched-out on or before completion of 12 months from the date of allotment of Units;
    • Nil - If Units are redeemed / switched-out after completion of 12 months from the date of allotment of Units.
  • Mahindra Dhan Sanchay Equity Savings Yojana

    Debt

    • The Modified duration of the portfolio increased to around 4.30
    • We may move around asset allocation to credits over gilts going ahead
    Riskometer
    Investor understands that their principal will be at moderately high risk.

    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.

    Fund Manager: Mr. Srinivasan Ramamurthy & Mr. Rahul Pal

    Benchmark: Composite Benchmark: 55% Nifty 50 Index + 30% Crisil Composite Bond Fund Index+15% Crisil Liquid Fund Index

    Entry Load: Not applicable

    Exit Load:

    10% of the units allotted shall be redeemed without any exit load, on or before completion of 12 months from the date of allotment of Units. Any redemption in excess of the above limit shall be subject to the following exit load;

    • An exit load of 1% is payable if Units are redeemed / switched-out on or before completion of 12 months from the date of allotment of Units;
    • Nil - If Units are redeemed / switched-out after completion of 12 months from the date of allotment of Units.
Equity Markets

We present charts tracking domestic index and sector, and global indices movements:

India Index
S&P BSE SENSEX Index Nifty 50 Nifty Auto Nifty Bank Nifty Financial Services Nifty FMCG Nifty IT Nifty Media Nifty Metal Nifty Commodities Nifty Realty Nifty Pharma Nifty Energy BSE Midcap BSE Smallcap
1 Month 0.078% 0.077% -0.002% 0.136% 0.117% 0.036% -0.007% 0.013% 0.060% 0.097% 0.169% 0.052% 0.112% 0.081% 0.098%
1 Year 0.173% 0.149% -0.230% 0.254% 0.229% 0.161% 0.249% -0.240% -0.133% -0.015% -0.085% 0.118% 0.247% -0.030% -0.116%
World Index
DOW JONES INDUS. AVG S&P 500 Index NASDAQ Composite Index FTSE 100 Index CAC 40 Index DAX Index NIKKEI 225 HANG SENG Index
1 Month 0.000% 0.018% 0.026% 0.029% 0.021% -0.001% -0.008% 0.015%
1 Year 0.087% 0.088% 0.112% 0.033% 0.043% -0.035% 0.008% -0.032%

Source: Bloomberg, data as on February 28th, 2020 | Performance - Absolute Returns

Equity Market Update

March was a largely subdued month for investors around the world, with modest changes in the DOW Jones (+0.2%), S&P500 (+2%), FTSE (+3%), NIKKEI (-1%) and HANG SENG (+1.5%). The global equity recovery that took most benchmarks to a five-month high showed some signs of cracking amid weakening data and a pivot by global central banks away from monetary normalization, reflecting some concerns about the outlook. Both the FOMC and the Bank of England (BoE) decided to keep their interest rates unchanged.

While the Fed unexpectedly announced plans to stabilize the size of its balance sheet from October 2019, BoE has indicated that Brexit uncertainties continue to weigh on confidence and short-term economic activity in the UK, notably business investment.

India was a relative outperformer (SENSEX and NIFTY rose ~8% each respectively). Indian markets remained upbeat aided by surge in FII flows during the month.

Scheme Specific Strategies For Equity Schemes
  • Mahindra Dhan Sanchay Equity Savings Yojana:
  • 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 is likely to invest in companies having one or more of the following - strong growth potential, 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 and deepening of the consumption basket of the country’s populace. 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 30 stocks currently. 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:

    Our aim to build a high conviction concentrated portfolio with a focus to generate alpha. Under normal circumstances we would try to maintain a portfolio of stocks following a blended style of growth and value 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.

    We deploy an agile portfolio management strategy, taking tactical calls for short to medium time horizons. Outside of the 80% minimum allocation in large caps, we may take exposure in mid-caps and small caps.

    On identifying structural trends which would play out over periods. These could include, but not limited to -

    • Increase in penetration in certain segments as per capita income of the country increases
    • Large market share shifts either from unorganized to organized sectors or between segments of players in the market place
    • Major economic transitions in the country such as infrastructure creation, policy reforms, socio economic transitions
    • Technological disruptions/enablers which could alter the construct of businesses in the country

    By doing the above, the scheme looks to capture the changes in the index constituents over a period in time even, before the same plays out.

Data Hangover
  • Domestic retail inflation came at 2.57% in the month of February 2019 –higher from 2.05% in January 2019. Core inflation was seen at 5.5% vs 5.4% month on month
  • Industrial production based on the general index of IIP expanded by 1.7% year-on-year in January 2019. Production in the mining, manufacturing and electricity sectors recorded growth rates of 3.9 per cent, 1.3 per cent and 0.8% per cent for January 2019. Consumer durable goods output grew by 1.8% per cent as against growth rate of 7.6 per cent in the same month of the previous year. Non-durables grew by 3.8 per cent.
  • The Nikkei India Composite PMI Output Index, a measure of private sector activity in both the manufacturing and services sectors, came in at 53.8 for February vs 53.6 a month ago.
  • INR appreciated in the month of March by ~2.2%. It was trading at 69.1/USD vs 70.7/USD, a month ago.
  • The trade deficit, gap between exports and imports, was at $9.6 billion in February 2019. Cumulative value of exports for the period April-February 2018-19 was $298.4 billion up 8.85%. Cumulative value of imports for the period April-February 2018-19 was $464 billion up 9.75% y/y.

Source: MOSPI, CGA, OEA

NEW TER SLABS APPLICABLE FROM APRIL 2019

Effective April 01, 2019, the Securities and Exchange Board of India (SEBI) has revised the maximum Total Expense Ratio (TER) including the investment management and advisory fee, that can be charged by Mutual Funds in terms of SEBI (Mutual Funds) Regulations, 1996.

The revised TER limits in case of open ended schemes is as provided below:

AUM Slab (INR Crore) TER for equity oriented schemes TER for other schemes (excl. Index, ETFs and Fund of Funds)
0 - 500 2.25% 2.00%
500 - 750 2.00% 1.75%
750 - 2000 1.75% 1.50%
2000 - 5000 1.60% 1.35%
5000 - 10000 1.50% 1.25%
10000 - 50000 TER reduction of 0.05% for every increase of 5000 crore AUM or part thereof
> 50000 1.05% 0.80%

Source : SEBI Notification, December 13, 2018

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

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 money market and debt instruments
Mahindra Ultra Short Term Yojana
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)
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
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 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.
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

Cno. 000545

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