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Bond And Money Market

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

Parameters 31-July-19 28-June-19 31-July-18
RBI Repo Rate % 5.75 5.75 6.25
5Y AAA % 7.37 7.67 8.57
5Y AAA-5Y Gsec Spread bps*# 97 79 54
10Y Gsec % (old ten year) 6.37 6.88 7.77
CPI (%) 3.18 3.05 4.17
IIP (FYTD) % 3.7 3.4 4.1
US 10Y % 2.02 2.01 2.96
Japan 10Y % -0.15 -0.33 0.44
EUR 10Y % -0.44 -0.33 0.44

Source: Bloomberg; Data as on July 31st, 2019 | * bps - basis points below the table on debt market | #Gilt annualized

The debt markets moved with a sense of decisiveness. The benchmark 10-year gilt rates declined by 50 basis points (bps) to close at 6.37. The AAA 5 year corporate bonds rallied by around 30 bps and closed at 7.37. The proposal in the budget for foreign sovereign borrowing, continued benign inflation and global uncertainty. Global central bankers retaining their dovish bias also helped the domestic bond market.

In the domestic money markets, there was a sharp downward movement as money market rates with rates moving down by around 100 bps through the month. In fact, some of the issuers managed to issue 3 month papers at a rate almost the repo rate. As the chances of a possible rate cut increase and also with ample liquidity, short term rates remained benign.

Debt Markets

The sentiments remain bullish; an uncertain economic growth globally, easing bias of global central bankers and a soft inflation outlook helps the domestic bond market. As certain credit events continued to affect the markets, credit spreads continued to remain elevated. However we think that credit spreads may narrow for AAA credits, including some NBFCs , once the underlying gilt curve stabilizes.

We continue to remain positive on gilts and certain credits.

Scheme Strategy - Debt schemes
  • Mahindra Low Duration Bachat Yojana
  • Mahindra Liquid Fund:
    • We will attempt to ensure adequate liquidity, safety and accrual
    • 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 was around 1.93
    • 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
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 -4.8% -5.7% -13.6% -7.2% -6.3% -1.6% -2.0% -4.0% -13.2% -10.0% -6.1% -1.0% -9.3% -7.8% -10.8%
1 Year -0.3% -2.1% -37.6% 4.0% 9.0% -6.3% 7.1% -30.9% -22.4% 10.2% -2.0% -13.0% -3.9% -14.7% -23.4%
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 2.2% 2.4% 3.3% 3.0% -0.5% -2.0% 2.0% -1.4%
1 Year 7.0% 7.0% 7.8% -1.3% -0.0% -5.1% -3.7% -1.5%

Source: Bloomberg, data as on July31st , 2019 | Performance – Absolute Returns

Equity Market Update

July was a modest month for investors around the world, with minor month-on-month increases in the DOW Jones (+1%), S&P500 (+1.3%), FTSE (+2.2%), NIKKEI (+1.2%), the outlier being HANG SENG (-2.7%). Globally, markets remained wary of the outcome of the US Federal Reserve's policy meeting and the US-China trade talks. India was a relative underperformer (SENSEX and NIFTY fell ~5% and ~6% respectively). Equity markets at home were weak as investors became increasingly worried about the possibility of slowing earnings growth amidst weak macroeconomic data.

With a challenging domestic macro-economic outlook, investors would expect further policy reforms and monetary stimulus from the government / RBI. On the global front, the near-term outlook still appears hazy. While the US Federal Reserve duly delivered on its 25bp cut, its Chairman Jerome Powell kept all options open, saying that the rate cut is a “mid-cycle adjustment”. Also, we remain cautious on the outcome from the ongoing US-China trade talks, even as global economies continue to exhibit signs of a slowdown. As the overall valuation of the key indices (NIFTY/SENSEX) is still above the long-term mean, we continue to believe future direction of the market will be stock specific and earnings specific.

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 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 27 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 25 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

Data Hangover
  • Domestic retail inflation rises marginally to 3.18% in the month of June 2019 –higher from 3.05% in May 2019. Core inflation eases to 4.1% vs 4.2% month on month.
  • Industrial production based on the general index of IIP grew by 3.1% year-on-year in May 2019. Production in the mining, manufacturing and electricity sectors recorded growth rates of 3.2 per cent, 2.5 per cent and 7.4 per cent for May 2019. Consumer durable goods output de-grew by 0.1% per cent as against growth rate of 6.7 per cent in the same month of the previous year. Non-durables grew by 7.7 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 50.8 in June vs. 51.7 in May.
  • INR was flat month over month at 69.06/USD.
  • The trade deficit, gap between exports and imports, was at $15.3 billion in June 2019. Cumulative value of exports for the period April-June 2019-20 was $81 billion down 1.7% year on year. Cumulative value of imports for the period April-June 2019-20 was $127 billion down 0.3% year on year.

Source: MOSPI, CGA, OEA

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. 00600

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