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WF: You are circumspect on near to medium-term prospects for the markets, and the valuation metrics you use in BAF are also suggesting a cautious equity stance. In this context, what is the rationale for introducing this new closed-ended fund now?
Naren: In the last few years, the Government of India has taken several structural reforms that could boost the economy and strengthen the growth prospects of "Bharat". These reforms are largely targeted towards infrastructure development, revival of public sector banks and re-energizing rural India. We are of the view that each of these pockets can still offers bottom-up stock picking opportunities.
WF: The three themes you will focus on are Building India, Financing India, and Rural Consumption. Can you elaborate the investment case for these three themes?
Naren: Each of the themes - Building India, Financing India, and Rural Consumption - is focussed largely on the Bharat story. Given below is the rationale of the themes:
The sector(s) / stock(s) mentioned in this presentation do not constitute any recommendation of the same and ICICI Prudential Mutual Fund may or may not have any future position in these sector(s) / stock(s). The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the scheme. Please refer to the SID for investment pattern, strategy and risk factors.
Build Bharat: Government's Thrust on Infrastructure
The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors and should not be circulated to investors/prospective investors. Past performance may or may not be sustained in future. Source: Macquerie Research; PMAY: Pradhan Mantri Awas Yojana. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the scheme. Please refer to the SID for investment pattern, strategy and risk factors.
With Government's thrust on infrastructure through initiatives such as Bharatmala and Sagarmala project, we see Build India as an exciting theme. Focus on roads construction is likely to result in additional investments flowing into infrastructure companies. In fact, better roadways can help reduce transportation time and support further construction activities in India. Therefore infrastructure and infra related industries like construction, cement, steel, etc. can all be the beneficiaries of Build India theme.
Rural Consumption: Initiatives Impacting Rural Bharat
The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors and should not be circulated to investors/prospective investors. Source: PIB.nic.in. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the scheme. Please refer to the SID for investment pattern, strategy and risk factors.
Rural India has been under stress over past three years due to successive weak monsoons in 2014 & 2015 coupled with low policy support (low Minimum Support Price hikes). Going forward, we expect the rural recovery to play out in FY18 due to good monsoon, low base and targeted government efforts. Also, rural household income, now, is no longer restricted to farm income alone. The emergence of additional income sources from non- agricultural sources such as dairy & poultry, tractor rental income and other small businesses, is likely to provide the much needed fillip to rural spending, thereby benefitting companies which stand to gain from rural consumption.
Financing India
Given the principal focus is on infrastructure development, financing is expected to play a critical role. Consequently, Financing India is likely to emerge as a major beneficiary of Build India and Rural consumption, as a means to support the financial requirements across the spectrum.
With the recent round of recapitalization, banks are expected to meet any new borrowing requirement of infrastructure led companies. Also, good monsoon coupled with green shoots visible in rural consumption may create demand in sectors like vehicle financing and others.
The information contained herein is solely for private circulation for reading/understanding of registered Advisors/Distributors and should not be circulated to investors/prospective investors. Past performance may or may not be sustained in future. Data Source: CLSA Report, April 2017
WF: Which of these three themes appears relatively the most compelling investment case now?
Naren: All of the three themes are equally compelling. Infra and financial is more of a structural play while rural consumption is largely cyclical.
WF: Given that this is an NFO in your Value series, do you find value in the three themes by current valuations or by future earnings projections?
Naren: We do believe these themes have the potential to transcend into multi-year ideas as each of the areas are under-penetrated, at this point. We see massive potential for growth in each of the segments and hence we are positive on the future earnings projections.
WF: Can you take us through how you propose to reduce net equity risk at market peaks?
Naren: The scheme at the discretion of fund manager may participate in derivative instruments to limit portfolio downside for which we propose to use a broad spectrum of derivatives.
WF: What are the key risks to the market now?
The risks are more global in nature than local. Rising crude oil prices and geo-political tensions are the primary factors to watchful of. Also, globally valuations are stretched; so in case of a pullback, Indian markets won't be immune to the ripple effects of such a development.
Riskometer & Disclaimer
Mutual Fund investments are subject to market risks, read all scheme related documents carefully
Disclaimer: All figures and data given in the document are dated unless stated otherwise. In the preparation of the material contained in this document, the AMC has used information that is publicly available, including information developed in-house. Some of the material used in the document may have been obtained from members/persons other than the AMC and/or its affiliates and which may have been made available to the AMC and/or to its affiliates. Information gathered and material used in this document is believed to be from reliable sources. The AMC however does not warrant the accuracy, reasonableness and / or completeness of any information. We have included statements / opinions / recommendations in this document, which contain words, or phrases such as "will", "expect", "should", "believe" and similar expressions or variations of such expressions, that are "forward looking statements". Actual results may differ materially from those suggested by the forward looking statements due to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on our services and / or investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices etc.
The AMC (including its affiliates), the Mutual Fund, the trust and any of its officers, directors, personnel and employees, shall not liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this material in any manner. The recipient alone shall be fully responsible/are liable for any decision taken on this material.
The sector(s)/stock(s) mentioned in this presentation do not constitute any recommendation of the same and ICICI Prudential Mutual Fund may or may not have any future position in these sector(s)/stock(s). Past performance may or may not be sustained in the future. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the scheme. Please refer to the SID for investment pattern, strategy and risk factors.
Investors are advised to consult their own legal, tax and financial advisors to determine possible tax, legal and other financial implication or consequence of subscribing to the units of ICICI Prudential Mutual Fund. The information herein is solely for private circulation and for reading/understanding of registered Advisors/Distributors and should not be circulated to investors/prospective investors.
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