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From the MD’s desk

India’s large cap companies’ have shown lesser volatility in different market cycles, but valuations have steadily moved up over these market cycles, making entry into Large Caps a considered decision. Large caps constitute about 70% of the entire market capitalization, and capture the essence and movement of the market. Known for their size, stability and sustainability, these companies help in creating value for the investor year after year with their profitability, cash flows, turnover and volume and continue to occupy space in in all equity funds. In our market, these are the bluechip companies

It is not frequently that Large Caps offer a reasonable valuation, as they do now. The reasons are:

  • Firstly, the India Market cap to GDP ratio is down to about 75% from a high of 110%. Large caps have historically represented more than half of the market cap, making a strong case for investment at this value. We believe this is a good time to for a new large cap schemes to offer an attractive long-term investment opportunity. Investors seeking potential long term capital appreciation from their investment may consider participating in Mahindra Pragati Bluechip Yojana.
  • Secondly, we can see that in our economy, which is growing at around 7.5-8% p.a. and where consumption is taking the lead, profits coming back rapidly in the large companies associated with Services, BFSI, IT, Healthcare, Metals, and Consumption. However, as we speak, the markets are nervous on account of political uncertainty. These large companies are earning rapidly but are not getting the value they deserve. We believe this could be the perfect time to invest in these large cap companies. However, not all the companies are seeing the same level of growth, so we think a tight portfolio may be initially better than an elaborate one.

What better way to invest than mutual funds? You can start a systematic investment or make a lumpsum investment in the Mahindra Pragati Bluechip Yojana. This fund will be investing at least 80% of its corpus in large cap equity stocks. Measure your stride with the market, progress with Mahindra Pragati Bluechip Yojana.

Mr. Ashutosh Bishnoi
MD & CEO

Data Source: Bloomberg, NSE | As on 30th Sep 2018

Bond And Money Market

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

Parameters 28-Jan-19 31-Jan-18 28-Feb-18
RBI Repo Rate % 6.25 6.50 6.00
5Y AAA % 8.43 8.59 8.02
5Y AAA-5Y Gsec Spread bps# 121 112 29
10Y Gsec % (old ten year) 7.41 7.28 7.73
CPI (%) 2.05 2.19 4.4
IIP (FYTD) % 4.6 5.0 3.7
US 10Y % 2.72 2.63 2.86
Japan 10Y % 0.02 0.01 0.05
EUR 10Y % 0.18 0.15 0.65

Source: Bloomberg; Data as on Feb 28, 2019
* bps - basis points below the table on debt market
# gilt annualized

It was a month of RBI reversing its policy stance to neutral and also cutting repo rates by 25 basis points. A low inflation prints also helped the bond market sentiments. While we saw a very sharp drop in the 5 year Gilts (and below that tenor) and corporate bonds, the 10 year Gilt moved up by around 13 bps , as the market continued to be worried about the borrowing numbers and the escalation of conflict on the western front. The announcement of continued large OMOs helped the street sentiments. With a stable liquidity, money market rates remained stable.

Debt Markets

The MPC changed its policy stance and cut rates. The CPI and Manufacturing WPI numbers too remained very benign. We think that the markets may be overtly bothered on the Government Borrowing numbers. The benchmark 10-year gilt has a difference of more 100 bps from the repo rates. Mean differences in a historic context have been much lower than 100 bps and thus throws about interesting possibilities. 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
  • 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 1.9 and with increase in Assets under management we intend to remain in the 2-2.50
    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 4.10
    • 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 Performance -0.049% -0.050% -0.080% 0.001% 0.006% -0.041% -0.057% 0.017% -0.054% -0.092% -0.021% -0.022% -0.124% -0.010% -0.016
1 Year Performance 0.037% 0.005% -0.224% 0.005% 0.039% 0.111% 0.379% -0.210% -0.150% -0.184% -0.294% 0.000% -0.052% -0.119% -0.193%
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 Performance -0.060% 0.042% 0.065% -0.061% -0.094% -0.078% -0.110% -0.115%
1 Year Performance 0.064% -0.079% -0.110% -0.063% -0.095% -0.147% -0.025% -0.130%

Source: Bloomberg, data as on February 28th, 2019; Performance – Absolute Returns

Equity Market Update

February was a largely downbeat month for investors around the world, with declines in the DOW Jones (-6%), S&P500 (-8%), FTSE (-6.3%), NIKKEI (-11%) and HANG SENG (-11.5%). India was a relative outperformer (SENSEX and NIFTY fell ~5% each respectively). However, towards the end of February 2019, US stocks ended the month strongly as the US administration shelved its threat to sharply increase tariffs on $200 billion of Chinese exports and inched closer to a resolution with China on trade. Also, Indian stock markets were largely resilient despite the emergence of geo-political tensions in the region

Overall, the third quarter results (FY19) for the NIFTY constituents have been good. In 3QFY19, aggregate sales / EBIDTA / PAT rose 23% yoy /5% yoy/ 6% respectively. The subdued PAT growth was largely due to net losses in the oil marketing, telecom and auto sectors. Overall valuations have become a bit cheaper, and with investors getting more clarity on the earnings trajectory, we expect the future direction of the market to remain largely 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.

    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 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.

    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 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.

    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.
Data Hangover
  • Domestic retail inflation came at 2.05% in the month of January 2019 –lower from 2.19% in December 2018. Core inflation was seen at 5.4% vs 5.7% month on month.
  • Industrial production based on the general index of IIP expanded by 2.4% year-on-year in December 2018. Production in the mining, manufacturing and electricity sectors recorded growth rates of -1.0 per cent, 2.7 per cent and 4.4% per cent for December 2018. Consumer durable goods output grew by 2.9% per cent as against growth rate of 2.1 per cent in the same month of the previous year. Non-durables grew by 5.3 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 January unchanged from December.
  • INR appreciated marginally in the month of February by ~0.7%. It was trading at 70.7/USD vs 71.3/USD, a month ago.
  • The trade deficit, gap between exports and imports, was at $14.8 billion in January 2019. Cumulative value of exports for the period April-January 2018-19 was $271.8 billion up 9.5%. Cumulative value of imports for the period April-January 2018-19 was $427.7 billion up 11.2% y/y.

Source: MOSPI, CGA, OEA

THE WAY FORWARD IS DIGITAL: EXCERPTS FROM DELOITTE INDIA’S PREDICTIONS

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.

5G: A JOURNEY TOWARDS BUILDING A SMART SOCIETY

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:

Healthcare

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

Manufacturing

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.

Agriculture

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.

Education

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

Scheme Name
Mahindra Liquid Fund
An Open Ended Liquid scheme
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)
Mahindra Credit Risk Yojana
An open ended debt scheme predominantly investing in AA and below rated corporate bonds (excluding AA+ rated corporate bonds)
Mahindra Mutual Fund Kar Bachat Yojana
An open ended equity linked saving scheme with a statutory lock in of 3 years and tax benefit
Mahindra Dhan Sanchay Equity Savings Yojana
(An open ended scheme investing in equity, arbitrage and debt)
Mahindra Mutual Fund Badhat Yojana
Multi Cap Fund- An open ended equity scheme investing across large cap, mid cap, small cap stocks
Mahindra Unnati Emerging Business Yojana
Mid Cap Fund – An open ended equity scheme predominantly investing in mid cap stocks
Mahindra Pragati Bluechip Yojana
Large Cap Fund - An open ended equity scheme predominantly investing in large cap stocks
Mahindra Rural Bharat Consumption Yojana
An open ended scheme following Rural India theme

* 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. 000524

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