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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 -2.0% -1.8% -3.6% -4.2% -2.6% -1.1%
1 Year 3.0% 6.7% -7.0% -3.6% -9.2% -16.7%

Source: Bloomberg Performance - Absolute returns | Data as on February 28th, 2023

Indian markets trended downwards in line with global equity markets. Globally the market sentiments took a negative turn as commentary from US Fed regarding a course of monetary policy in CY23 suggests no rate cut possibility. As rates will likely remain higher for longer, the markets across asset classes (equity, bonds, currency, commodities, real estate etc.) are looking for a price adjustment to reflect the rate scenario. Sector-wise, Financials, FMCG & IT outperformed while Auto, Energy, Metals, Realty and Pharma underperformed Nifty. The news flow from China post the re-opening from covid remains mixed with any clear trends from the available data.

Indian economy grew in Q3 at 4.4% for GDP, marginally lower than estimates. Growth was led by GFCF growth of 8.3%, with private consumption growth weak at 2.1%. 3QFY23 real GVA grew by 4.6%, led by services growth of 6.2%, agricultural sector growth of 3.7%. The NSO maintained its FY2023 GDP growth at 7% (same as the first advance estimates). This makes the 4QFY23 implied growth rate 5.1%. The FY2024E GDP growth estimates are likely in the range of 5.75% -6.0 %. Key risks to growth estimate are lagged impact of the RBI rate hike, uncertainty on monsoon outturn and the slowdown in developed economies (hurting India’s exports).

Looking Ahead

India remains in a sweet spot as a bottom-up stock idea over the medium to long term. The growth trajectory is likely led by economic reforms, infrastructure creation, PLI & China+1 strategy, and the building blocks are in place for the move towards 3rd largest economy. The near-term headwind to the India story is the economy growing in FY24 at lower potential due to tighter monetary policy (India as well as global) & export dependency on global economic growth.

From the equity market perspective, the key issue is the relative valuations that Indian markets enjoy vis other markets. Hence the relevance of tracking FPI action while they have an option of choosing India’s longer-term growth vs near-term value in some other countries. The choice in the recent past has been a selling in India to invest in other markets, and the quantum of selling is low, hence the belief that core allocation to India remains relevant for FPIs.

We have witnessed constant sector rotation playing out in cycles of 6 months at max, with broad market indices remaining unchanged. This is partly a case of economy normalising and excessive leverage in markets where investors have turned traders for quick gains by taking recourse to leverage. When in such a consolidation mode, markets offer stock selection opportunities over sectors. Companies with earning resilience and cash flows could be better investment opportunities at present.

Historically we have seen that markets when in consolidation, are a perfect case of buying equities as an asset class. When investing over a 3-5-7 years timeframe, Large, Mid & Small as a category may give reasonably similar returns, especially when considering associated volatility. However, if investors believe in fund managers' ability to make moves within large, mid and small-cap segments, then mandate like Flexi Cap & Focused may be suitable for them.





Scheme Strategy - Equity Schemes
  • Mahindra Manulife Multi Cap Fund
  • Mahindra Manulife Mid Cap Fund
    • 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 Fund
    • 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 Fund
    • The Scheme follows top down sector allocation and bottom up stock selection ideas that may benefit based on health of economy. Allocation across market caps is a function of economic outlook, domestic liquidity and stage of market cycle. Focus will be on high quality, growth focused companies available at reasonable valuations.
  • Mahindra Manulife Consumption Fund
    • The portfolio is a thematic fund and aims to invest in companies which are expected to benefit from consumption led demand. Allocation will be across market caps and focus to invest in growth-oriented companies with strong financial strength available at reasonable valuations. Companies engaged in consumption and related sectors will have allocation of more than 80% in the portfolio.
  • Mahindra Manulife Large Cap Fund
    • 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 earnings growth potential, strong balance sheet and good governance.
  • Mahindra Manulife Large & Mid Cap Fund
    • 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 53%,38% and 5% of net equity holdings in large, mid and small cap respectively.
  • Mahindra Manulife Focused Fund

      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.
  • Mahindra Manulife Small Cap Fund
    • This scheme would aim to invest in companies that demonstrate reasonable earnings growth outlook, balance sheet strength and a potential of rerating. The portfolio will invest predominantly in Small cap stocks (>65%) apart from some exposure to mid and large-cap stocks. The portfolio will be adopting predominantly bottom-up approach to investing.
Scheme Specific Strategies for Hybrid Schemes
  • Mahindra Manulife Equity Savings Fund

    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 Aggressive Hybrid Fund

    Equity:

    • Macro theme of the portfolio will be to identify the status of economy and invest in sectors with potential to outperform.
    • Portfolio composition would have preference for companies with potential for earnings upgrade and possible valuation upgrades as well.


    Debt:

    • The Modified duration of the portfolio is around 2.62 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 Fund

    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 2.61 years for the debt portion.
    • The duration is built through exposure in 10-year/5-year Gilt.
Bond And Money Market

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

Parameters 28th February 23 31st January 23 28th February 22
RBI Repo Rate % 6.50 6.25 4.00
5Y AAA PSU % 7.60 7.69 6.36
1 year CD % 7.87 7.68 4.90
10Y Gsec % 7.43 7.34 6.77
CPI (%) 6.52 5.72 6.01
IIP (YoY) % 4.25 7.11 0.44
US 10Y % 3.92 3.61 1.83
Dollar Rupee 82.67 81.92 75.34

February is usually a busy calendar for financial markets as the Budget, and the Monetary policy committee are scheduled. The Budget was largely positive, with the Government adhering to the fiscal prudence trajectory, conservative revenue projections and a significant tilt towards capital expenditure. What the debt markets would look at askance is the dependence on small savings to fund the deficit, which may be challenged by other fixed-income products offering similar returns and, thus, a possible shortfall in flows through small savings schemes. The subsidies would also be looked through carefully as high commodities may put upward pressure on the subsidies payout.The MPC raised rates by 25 basis points (bps) to 6.50%, with the monetary policy stance remaining unchanged. The RBI maintained its inflation forecast for the next fiscal year primarily to around 5% to 5.50%. It also lowered the GDP growth to 6.40% for the next fiscal year.

The domestic CPI data was printed at 6.52 %, with the core remaining sticky at 6% plus. This number was ahead of the street estimates, and the markets started selling off. The benchmark 10-year gilt increased by around nine bps to close at 7.43%. Further, with the US continuing to show robust numbers, the US ten-year sovereign also sold off hugely through the month, with the US ten-year gilts moving up by around 31 bps to close at 3.92%.

Looking Ahead
  • 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 priced mainly in such rate hikes. With RBI projecting 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, crude and agri commodities softening through the past few months, a sustained commodity slowdown may provide a respite to retail inflation.
  • The bear flattening of the yield curve, especially in the 1-5 year segment, has primarily happened, hinting at the possible end of the upward movement of the domestic rate trajectory.
  • AAA credit spreads are very tight, and the probability of spreads increasing soon remains a distinct possibility.
  • Liquidity being gradually normalized, the extremely 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 the recession, which also bodes well for fixed income allocation.
What should an investor do?
  • Investors with a shorter time horizon of less than one year may continue investments in ultra-short-Duration and low-duration funds.
  • Short term fund category may be suitable for investors looking to stay for a time horizon beyond one year with lower-risk volatility. 
  • For a long investment horizon and with a suitable risk appetite, an allocation to a Dynamic Bond fund merits attention.
Scheme strategy – Debt Schemes
  • Mahindra Manulife Low Duration Fund
    • The average maturity is around 290.07 days.
    • The YTM of the portfolio is increased to 7.63%.
    • With our view on Gsec possibly offering better opportunities than Bonds, we derive around 30% of our duration through Gsecs in this fund.
    • We would remain skewed in this duration range as the RBI has started the hike cycle.
      • 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 Duration Fund
    • The average maturity of the portfolio is around 158.09 days.
    • We will remain in this maturity segment as we move ahead through the next month.
    • The YTM of the portfolio is around 7.56%.
      • 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 Fund
    • The YTM of the portfolio has is around 7.44%.
    • The Modified Duration of the portfolio (MD) is maintained around 3.25 years.
    • The Portfolio largely derives it duration from Gilts as we believe that the AAA credit spreads 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 Duration Fund
    • The YTM of the portfolio is around 7.45%.
    • The Modified duration of the portfolio is around 1.67 years and we would keep this duration going ahead.
    • Our portfolio continues to have a large allocation towards gilts, accounting for around 50% of the duration 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 Fund
(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 Fund
(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 Fund
(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 Fund
(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 Consumption Fund
(An open ended equity scheme following Consumption 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 consumption led demand in 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 Fund:
(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 Large & Mid Cap Fund
(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 Fund
(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 Fund
(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 Aggressive Hybrid Fund
(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 Fund
(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 Duration 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 understands that their principal will be at 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 Fund
(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 Duration 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 Low to 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 (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 its directors or associates shall be liable for any damages that may arise from the use of the information contained herein.

Cno.01465

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