Bond And Money Market

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

Parameters 31-Jan-19 31-Dec-18 31-Jan-18
RBI Repo Rate %6.506.506.00
5Y AAA %8.598.427.74
5Y AAA-5Y Gsec Spread bps#11211036
10Y Gsec % (old ten year)7.487.377.43
CPI (%)2.192.335.07
US 10Y %2.632.682.71
Japan 10Y %
EUR 10Y %

#January was a month of sell offs for the debt markets; the ten-year gilt benchmark moved up by around 11 basis (bps) point; AAA corporate bond yields too moved up by around 15 bps. The money market rates were stable with liquidity being adequate in the system. Despite a low inflation print, the market sold off as market participants were worried about the fiscal deficit numbers of the budget. The sold off accentuated post the budget, with gilt yields moving up by around 20 bps, post the announcement of the borrowing numbers.

Source: Bloomberg; Data as on Jan 31, 2019

Debt Markets

The debt markets sold off by 20 basis points sometime after the budget. The street has a concern on the budget math on assumptions on some receipts under the capital account. Incidentally last year too during the budget day the ten year had sold off to a similar extent.

However, we remain of the opinion, that interest rates, notwithstanding today’s reaction, may inch downwards. While the Fiscal Deficit deviation may prompt a neutral RBI response, we think that stable commodity and food prices may lead to benign interest rate environment. As talks of possible uncertainty in global environment prevails, there may emerge a risk off trade globally, leading to a potentially softening bias of interest rates. The key risk for debt market emerges domestically in driving up a consumption led demand. We think that allocation to corporate bonds offer a better risk reward pay offs and we have aligned our scheme positioning.

Scheme Strategy - Debt schemes
  • Mahindra Low Duration Bachat Yojana
  • 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
    • We constructed a portfolio with a mix of AAA, AA and A+ rated papers
    • Our average maturity of the portfolio is around 2.5 years and with increase in Assets under management we intend to remain in the 2.5- 3 years’ average maturity
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 Month0.5%-0.3%-11.00.5%-1.1%-2.3%7.3%-15.3-7.6%-4.8%-1.6%-0.5%3.2%-5.7%-5.3%
1 Year0.8%-1.8%-29.2-0.3%1.7%9.9%19.4%-37.7-28.3-20.4-33.7-6.0%2.3%-16.1-25.6
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 Month7.2%6.9%8.3%3.2%5.2%5.9%2.7%7.0%
1 Year-4.3%-5.1%-3.1%-7.9%-9.3%-15.2%-11.0%-15.9%

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

Equity Market Update

January was an upbeat month for investors around the world, with increases in the DOW Jones (+7%), S&P500 (+7%), FTSE (+3%), NIKKEI (+3%) and HANG SENG (+7%). India was a relative underperformer (SENSEX rose 0.5%, while NIFTY fell 0.3%), given lingering concerns over liquidity and a wait-and-watch approach towards the Union Budget 2019 and quarterly results of individual companies. Among the sectoral indices, while NIFTY IT saw the highest monthly gain (+7%), indices which saw sharp declines included NIFTY Metals (-15%), NIFTY Auto (-11%) and NIFTY Media (-15%). The rally in other European and Asian markets was likely led by the Federal Reserve signal that it’s done raising interest rates for at least a while, and will be flexible in reducing its bond holdings, a swivel from its bias toward tighter monetary policy just last year

The markets reacted positively with the announcement of the farm sector intervention, income tax rebates and housing led benefits. This works wonderfully well for a large part of the rural economy and large parts of the middle class sector. We believe that these interventions may benefit the consumption and rural focused themes. Additional sops for real estate sector may benefit the building material segments. While there is a muted Government led capex growth, we think that the paradigm will shift towards a private sector led capex growth. All of these measures could potentially lead to a buoyant equity markets.

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.

Data Hangover
  • Domestic retail inflation came at 2.19% in the month of December 2018 –lower from 2.33% in November 2018. Core inflation was seen at 5.7%.
  • Industrial production based on the general index of IIP expanded by 0.5% year-on-year in November 2018. Production in the mining, manufacturing and electricity sectors recorded growth rates of 2.7 per cent, -0.4 per cent and 5.1% per cent for November 2018. Consumer durable goods output de-grew by 0.9% per cent as against growth rate of 3.1 per cent in the same month of the previous year. Non-durables de-grew by 0.6 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 53.6 for December. It was at 54.5 in November 2018.
  • INR depreciated in the month of January by ~2%. It was trading at 71.3/USD vs 69.8/USD, a month ago.
  • The trade deficit, gap between exports and imports, was at $13.1 billion in December 2018. Cumulative value of exports for the period April-December 2018-19 was $245.4 billion up 10.2%. Cumulative value of imports for the period April-December 2018-19 was $386.6 billion up 12.6% y/y.



Digitally invested Assets Under Management (AUM) are likely to grow 80 per cent to Rs 450 billion in 2019.

In 2018, the total value of AUM investments made through digital channels was Rs 250 billion.

"Deloitte India predicts that wealth management in the country will see a continuous and significant shift towards 'digital investing', i.e., investment in financial assets through mobile or web applications," said the 'Technology, Media and Telecommunications India Predictions 2019

"In comparison, overall retail AUM is expected to grow 37 per cent. In other words, digital investing will grow at more than double the rate of overall investment in mutual funds," it said.

If the projected growth for 2019 continues beyond as well, the AUM for individual investments in mutual funds invested digitally will cross INR 1 trillion by 2021; FDs booked through digital channels will exceed 50% of all FDs booked by 2022; and 1 in every 2 retail investors will use a digital platform to buy or sell equities by 2025. In all, technology will play a crucial role in providing equal access to investments and wealth management.

It is expected that over-the-top (OTT) video content will continue to see rapid growth in both demand and supply. However, unlike in developed markets, the impact on TV is likely to be additive rather than disruptive – at least in the medium term. Further, a key theme that has already started playing out is the importance of great content at scale and convergence. Young population, smartphone penetration, low cost broadband, quality and breadth of content, digital payment ecosystem are factors driving the demand for OTT video content in India. It is expected that online video audience will double over the next three years. This is further reflected in the level of competition in the market today. More than 30 OTT video offerings are available and more players are contemplating entering the Indian market. Accounting for 75% of the new video audience, rural India is expected to drive the growth of the digital segment.


Deloitte predicts that in 2019, with faster adoption and application, 5G will play a crucial role in building a smarter society. Major areas that will positively benefit from the 5G explosion are:


Smart wearables, tele-medicine and robotic surgery will be major contributions of 5G.


5G use case around smart manufacturing leveraging on uRLLC and mMTC features focuses on industrial efficiency bringing in cost reductions as well as enhancing productivity and profitability.


5G will enable climate change monitoring or soil and crop monitoring, Smart irrigation, livestock monitoring and autonomous tractors will be made available to the farmers.


Smart education use cases leverage on the eMBB and mMTC features to bring quality education, irrespective of location, thereby addressing the availability and accessibility issue.

Smart cities

With the population growth and urbanisation in India, 5G could help in creating a sustainable ecosystem where people can lead better lives.

Source: Deloitte TMT Predictions 2019


Mutual fund houses made investment of over Rs 7,000 crore in domestic equities in January 2019, even as foreign investors pulled out a massive Rs 5,200 crore.

The sell-off by foreign portfolio investors (FPIs) from the Indian equity markets has provided an opportunity to mutual fund managers, experts believe.

According to the data available with Securities and Exchange Board of India (SEBI) and depositories, fund managers bought shares worth Rs 7,160 crore on a net basis in January 2019. On the other hand, FPIs pulled out Rs 5,264 crore from equities.

Investment in domestic equities by fund managers could be largely attributed to retail investors who continue to invest through systematic investment plan (SIP), market experts said.

The fund houses believe that the uptrend may continue in the coming months too as large amount of flow is expected through the SIP route.

SIP is an investment vehicle that allows investors to invest in small amount periodically, instead of a lump sum payment. The frequency of investment is usually weekly, monthly or quarterly. It is similar to a recurring deposit where investors deposit a small or fixed amount every month.

The outflow by FPIs from equities indicates their 'wait and watch' approach ahead of the general elections.

FPIs are taking cautious or 'wait and watch' stance towards India, which they have been maintaining for a long time, said Himanshu Srivastava, senior analyst manager research at Morningstar Investment adviser India.

He further said the focus would continue to be on economic growth and the general elections.

Other factors such as movement in crude prices and currency, which would have a bearing on the country's macro-environment, and worries over global trade war will continue to guide the direction of FPI flows, Srivastava added

Source: Firstpost, SEBI

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