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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 -2.1% 0.6% -1.7% -4.9% -8.8% -13.3%
1 Yr Performance 16.9% 23.5% 19.8% -2.6% -1.2% -11.7%

Source: Bloomberg: Data as on April 30th, 2022

Indian markets continued to witness flows from domestic investors and global investors moving in the opposite directions. While FPIs continued their selling pressure, retail investors remained aggressive buyers both directly as well as through domestic institutions. Broad markets were down with a high gap in sectoral performances. Sector-wise, Energy, Auto, FMCG outperformed markets while IT, Realty & Financials underperformed. Global markets were quite weak, especially in US, where the fall was led by high growth stocks in Nasdaq.

Globally, the financial markets remain worried on the implications of US Fed policy tightening actions, as well as the emerging implications of the Russia-Ukraine conflict. The military conflict has evolved into a financial conflict with commodities and currencies taking their share of volatilities. A natural outcome is the rising inflation due to lack of exports by Ukraine and sanctions imposed on Russia by US and EU. The inflationary spike from the conflict has aggravated the already high inflationary environment across the globe. The US Fed announced an aggressive road map for rate hike and liquidity withdrawal. The markets have been negatively surprised by the new road map.

On the Covid-19 front, China retained the lockdown route to curb Covid-19. The lockdowns would hurt China’s economic growth and in turn world economy by supply constraints. High inflation and supply disruption could lead global economy into a low growth and high inflationary combination; stagflation.

This is clearly a negative surprise for financial markets and asset valuations may need to readjust to the same. US Fed has shown a tough resolve to tackle inflation as their own estimates of inflation being transitory has not been validated in last 12 months. The Fed action amidst Ukraine conflict is clearly a negative for the world economy.

Indian economy too, is seeing similar impact of high inflation and deceleration in growth. Growth estimates are being downgraded by various agencies as impact of high commodity prices as well as slowing global growth are incorporated. Indian exports have picked up pace in past 2 years and with exports at nearly $670 billion, accounting for 20% of GDP, any slowdown in global demand would hurt Indian growth. India’s energy import dependency is high and hence rising prices of oil, gas and coal are a big dampener on macro-economic (currency, inflation, fiscal deficit etc) as well as micro (corporate profitability) front. RBI’s MPC members too sounded caution with RBI Governor Shaktikanta Das highlighting challenges of dealing with the growth-inflation trade-off. Any policy tightening by RBI could put additional force on Indian growth.

Looking Ahead

The quick resolution to Russia-Ukraine conflict and sanctions on Russia remains pre-dominant variables for global economic stability and also for financial markets. The US Fed policy was out this week to provide further clarity on their path to normalisation. The challenge for markets being that the US Fed doesn’t have too much space on monetary front considering past 2 years of highly accommodative policies. These policies allowed investors to take higher risks, leading a sharp rally in markets, more driven by growth in valuation gains rather than earnings growth. Globally, the key risk in equity markets is the reversal of the high valuations as the US Fed moves ahead on the tightening path.

For Indian economy and corporates too, the implications are similar. High inflation typically creates margin pressure as well as demand contraction and hence earnings estimates could get downgraded. The results so far in Q4FY23 have shown margin pressures already. The real impact is however likely to be felt in Q1FY23. Indian macro remains good, driven by impressive tax collection growth. Amidst the uncertainties, our investment approach remains focussed on quality companies that are market leaders in their respective industries with least leveraged balance-sheets and some pricing power for their products. Challenge to the Indian markets is the sizeable selling by FPIs since October 2021.

Asset allocation to equities creates wealth over long-term as growth rewards equity assets. Growth outlook turns volatile at various times due to multiple factors. History has shown that equity assets acquired during volatile times deliver better returns over longer-term. We recommend

    1. Conservative investors continue to use systematic investment route and avoid the market timing worries.
    2. Aggressive investors can attempt market timing via lumpsum investments.
    3. Balance investors use “Balanced Advantage route”. This allows fund managers the flexibility of shifting asset allocation and time the market during volatility.




Scheme Specific Strategies for 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 investing in predominantly 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 and continue to do so. 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 1.50 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 2.60 years for the debt portion.
    • We have now a larger allocation to gilts than credits and may maintain this stance in the near future.
  • Mahindra Manulife Balanced Advantage Yojana

    Equity:

    • Portfolio composition would 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 2.86 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:

  • 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 29th Apr 22 31st Mar 22 30th Apr 21
RBI Repo Rate % 4.00 4.00 4.00
5Y AAA PSU % 6.87 6.50 6.22
1 year CD % 5.30 4.71 3.90
10Y Gsec % 7.13 6.84 6.03
CPI (%) 6.95 6.04 5.52
IIP (YoY) % 1.69 1.32 -3.58
US 10Y % 2.94 2.34 1.63
Dollar Rupee 76.43 75.79 74.09

Source: Bloomberg; Data as on April 29th, 2022

It was a difficult month for the debt markets. The month started with the MPC raising the SDF (standing deposit facility) rates to 3.75% and deeming it as the floor rate for Monetary policy instead of the reverse repos rate. The repo rate at 4.25% was unchanged and the MPC also decided to remain accommodative. The MPC raised its guidance for the inflation for 2022-23 to an average of 5.7% (from 4.5%) and lowered GDP growth to 7.2%. In a significant shift of focus, the RBI changed its focus on managing inflation than managing growth. With RBI turning a hawk eye towards inflation, and hawkish policy actions from global central bankers, the domestic debt markets turned further apprehensive. The benchmark 10-year gilt moved up around 30 bps to close at 7.13% and similar movements were witnessed in other segments of the yield curve. The 1-year segments saw the yields moving up by 50-60 bps in response to the MPC action. Globally, the US treasuries too moved up by around 50-60 bps on the chances of the Fed tightening and the risks of a gradual drawdown of the Fed Balance sheet . Elsewhere, Central Bankers of Sweden, Hungary also moved up their benchmark policy rates.

Looking Ahead
  • 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
  • While the possibility of a bear flattening of the yield curve exists with long-term rates rising lesser than short term rates, the recent GoI borrowing calendar possibly defers the event as the borrowing calendar looks skewed on the longer-end
  • 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 of beyond one-year with a lower risk of 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 226 days
    • The YTM of the portfolio is around 4.84%
    • With our view on Gsec possibly offering better opportunities than Bonds, we derive around 30% of our duration through Gsecs in this fund
      • 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 150 days
    • We will gradually reduce the maturity as we move ahead through the next month
    • The YTM of the portfolio is around 4.62%
      • 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 6%.
    • The Modified Duration of the portfolio (MD) decreased to around 3 years
    • While we derive around a large portion of our duration through our exposure to longer-dated gilts, we may replace it with an equal duration through medium tenored Gsec.
      • 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 5.50%
    • The Modified duration of the portfolio is around 1.50 years
    • Our portfolio continues to have a large allocation towards gilts, accounting for around 50% 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 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 moderately high risk
 Nifty 50 Hybrid Composite Debt 50: 50 Index TR
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 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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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.