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Equity Markets

We present a summary of changes in key Indian & Global equity indices.

Performance:
Duration Nifty 50 Nifty Midcap 100 Nifty Small Cap 100 Dow Jones Indus. Avg S&P 500 Index Nasdaq Composite Index
1 Month 4.1% 1.9% 3.0% 5.7% 5.4% 4.4%
1 Year 10.5% 8.1% -6.4% 0.3% -10.7% -26.2%

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

A 20bps inflation print beat in the US CPI, led to a risk-on rally in global markets as expectations got built for a pivot by US Fed in this tightening cycle. Indian markets too continued the rally with Nifty making a new life high to end the month. Institutional participation was led by FIIs with net buying of approximately Rs 36,000 crore. Over past 4-5 months, we have seen a change in FII inflows from a series of outflows in prior 6-8 months. Indian economy remains among top growing economies in the world, attracting investments.

Indian markets rallied with Nifty being the best performing, followed by the small cap index marginally behind. Sector wise Metals, IT and Financials outperformed while Auto and Pharma underperformed Nifty. The hope of China easing the Covid restrictions and initiating a stimulus package for its struggling real estate sector led to rally in global commodities.

Indian economy grew in Q2 at 6.3% for GDP, marginally better than estimates, and GVA at 5.6% YoY. GVA growth was led by Agriculture and Services sectors at 4.6% YoY and 9% YoY, respectively. High agriculture prices and pent-up demand for services (notably travel & tourism) led the growth and supported the economy. Decline in manufacturing sector was however a negative surprise. We believe that this could be a temporary blip due to margin pressures across the value chain and improve going into next year.

Post festive season, demand trends in some of the discretionary categories have seen slowdown. We believe it could be a seasonal lull, but continue to monitor the trends. Media reports indicate a record wedding season this year, after a two-year stretch where Covid impacted celebrations. Demand trends for jewellery and wedding wear continues to show strong traction even post-festive season, giving a comfort on wedding season.

Looking Ahead

Globally, there are expectations of a “Santa rally” in equities towards the year-end. Some support from favorable data points from the US CPI data or a positive commentary by UD Fed, can boost sentiments. A policy action from China, in terms of a move to unwind zero Covid stance can help the sentiments towards Emerging Markets (EMs) as well as inflation reduction as supply normalizes. We believe India continues to remain in a sweet spot and barring any global liquidity or credit risk event, Indian equity markets are likely to stay strong into the year-end.

As we move into the next year, we will have multiple data points to navigate – budget in February, path of Russia-Ukraine conflict, US and EU GDP impact post massive rate hikes and the impact of QT on credit markets. While structural story for Indian economy and markets remaining strong, the global linkage is something we need to be watchful of as that impacts sentiments and markets in near term.

Asset allocation to equities creates wealth over long term as growth rewards equity assets. Growth outlook may turn volatile at various times due to multiple factors. History has shown that equity assets acquired during these volatile times deliver better returns over longer term. In terms of market capitalisation, small cap as a broad segment looks reasonable from valuation perspective.





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 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 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 49%,44% and 7% 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 invest in sectors with potential to outperform.
    • Portfolio composition may have preference for companies with potential for earnings upgrade and possible valuation upgrades as well.


    Debt:

    • The Modified duration of the portfolio is around 2.23 years for the debt portion.
    • The scheme now has a larger allocation to gilts than credits and may maintain this stance in the near future.
  • Mahindra Manulife Balanced Advantage Yojana

    Equity:

    • Portfolio composition may 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 1.17 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:

  • We believe that the investors with a shorter time horizon of less than one-year may continue their 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, an allocation to Dynamic Bond fund merits attention.
Bond And Money Market

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

Parameters 30th November 22 31st October 22 30th November 21
RBI Repo Rate % 5.90 5.90 4.00
5Y AAA PSU % 7.46 7.65 5.97
1 year CD % 7.43 7.64 4.39
10Y Gsec % 7.28 7.45 6.33
CPI (%) 6.77 7.41 4.48
IIP (YoY) % 3.09 -0.83 3.06
US 10Y % 3.61 4.05 1.44
Dollar Rupee 81.43 82.79 75.17

Source: Bloomberg; Data as on November 30th, 2022.

It was a good month for the domestic debt markets as rates across the yield curve softened. The benchmark 10-year gilt softened by around 17 basis points (bps) to close at 7.28%. There were several tail winds aiding the softening bias. Crude prices cooled off significantly by around 8-10 percent. The US ten year too softened by around 45 bps to close 3.60%.

India retail inflation printed at 6.77% along the expected lines. The core inflation continues to remain sticky around 6.30%. With commodities cooling off, we believe inflation can ease and edge closer to the RBI target band.

Looking Ahead
  • The Monetary Policy Committee (MPC) of the RBI meets between December 5-7. We expect the MPC to hike rates between 25-35 basis points. What may be of interest is whether the MPC takes cognizance of the softening in the commodities prices and crude prices and make policy moves data dependent.
  • We think the domestic rate cycle is close to its peak. While RBI may have a bit more rate hike cycle up its sleeve, the markets have largely priced in such rate hikes. With RBI projecting an inflation of 5% in the second quarter of fiscal 2024, the time is now apt for looking into fixed income products across all duration segments. With commodity prices, barring crude, softening through the past 3 months; we think a sustained commodity slowdown may provide a respite to the retail inflation.
  • The bear flattening of the yield curve specially in the 1-5 year segment has largely happened hinting at the possible end of the upward movement of the domestic rate trajectory.
  • We also believe that AAA credit spreads are very tight and the probability of spreads to increase soon remains a distinct possibility.
  • Liquidity being gradually normalized, the extreme short end of the yield curve will also remain under pressure.
  • With US Fed trying to engineer a soft landing to the economy, there has been historically no precedence of inflation remaining high after recession, which possibly also bodes well for fixed income allocation.
Scheme strategy – Debt Schemes
  • Mahindra Manulife Low Duration Fund
    • The average maturity is around 248.75 days.
    • The YTM of the portfolio decreased to around 7.15%.
    • With the view on Gsec possibly offering better opportunities than Bonds, around 30% of duration in this scheme is derived through Gsecs.
    • The scheme may remain skewed in this duration range.
      • 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 is around 117.58 days.
    • The scheme is likely to remain in this maturity segment as we move ahead through the next month.
    • The YTM of the portfolio is around 6.92%.
      • 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
    • The schemes continues to maintain a healthy mix of certificate of deposits and commercial papers.
    • The scheme aims 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 6.99%.
    • The Modified Duration of the portfolio (MD) is maintained around 3.32 years.
    • The portfolio largely derives its duration from Gilts as the AAA credit spreads is likely to remain tight and 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 7.28%.
    • The Modified Duration of the portfolio increased to around 1.97 years and the scheme may keep this duration going ahead.
    • The scheme portfolio continues to have a large allocation towards sovereigns, accounting for around 70% of the duration as we are wary of the spreads in AAA credit segment.
      • 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 Very 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 Low to 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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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.