Fund Fact Sheet Unit Linked Insurance Plans – Individual policyholders June 2020 Disclaimer: Past performance may or may not be sustained in future and is not a guarantee of future performance. Some of the contents of this document may contain statements / estimates / expectations / predictions, which may be 'forward looking'. The actual outcomes could differ materially from those expressed /implied in this document. These statements, do not intend to provide personal recommendation to any specific individual or any investment needs of an individual. The recommendations / statements / estimates / expectations / predictions are of general in nature and may not take into account the specific investment needs or risk appetite or financial situations of individual clients. Therefore, before acting on any advice or recommendations contained in this document, readers, in their own interest, should consider seeking advice from any authorized and professional investment advisors or financial consultants.’ MarketFirst Monthly Report June 2020 Indian equity market indices rose sharply during the month Crude Oil prices rose, continuing its comeback from record lows mainly outperforming most global markets. Market rally was driven by led by output cuts. Gold prices continued to rise, driven by safe haven optimism surrounding opening of the economy post easing of the demand. lockdown measures and the continued economic support provided Domestically, geopolitical tensions rose as the Indo-China military by the government and central bank. Fixed income markets stand- off continued along the Line of Actual Control (LAC) near remained rangebound during the month. Eastern Ladakh. Government of India also banned certain Chinese Below are some key pointers which impacted the markets during apps citing cybersecurity concerns. the month: Government initiated the process of phased opening of the economy • Central Government began the process of ‘unlock down’ i.e. phase known as ‘unlock down’. Key economic data such industrial production, wise opening of the economy. core sector data (for May) & manufacturing PMI remained subdued, reflecting the economic impact of the lockdown measures to combat • India-China border tensions intensified amid military standoff along the virus spread. The future trajectory of economic data continues to the Line of Actual Control (LAC) in Eastern Ladakh. remain uncertain. RBI announced open market operations (OMO) of • Credit Rating Agency Moody’s downgraded India’s sovereign credit government securities whereby it aims simultaneous purchase and rating by one notch and maintained their negative outlook. sale of government securities of different tenors. • Key economic parameters such as factory output (IIP de-growth of With regards to the institutional flows, FPI were net buyers of equities 55.5 percent in April vs de-growth 16.7 percent in March), (cash market) worth INR 18684 Cr (USD 2473 Mn) and sellers of debt manufacturing PMI (PMI of 47.2 in June vs 30.8 in May) have been worth INR 1714 Cr (USD 226 Mn). DIIs were buyers of equities worth reflecting the economic impact of COVID 19 outbreak. Meanwhile, INR 2434 Cr (USD 320 Mn). the headline retail inflation data wasn’t released given limited availability of data. Performance of Sectoral indices during June 2020 Movement / Trends in key market variables: Present Price Change Particulars Level 3M 6M 1 Year Generic 1st 'CO' Future 41.15 80.96% -37.65% -38.17% Gold Spot $/Oz 1780.96 12.92% 17.38% 26.35% Indian Rupee Spot 75.5075 -0.16% 5.78% 9.39% MSCI EM 995.1 17.27% -10.73% -5.67% MSCI WORLD 2201.79 18.84% -6.64% 1.08% Nifty 50 10302.1 19.82% -15.34% -12.61% Equity Market Valuation: Sensex @ 34915 FY20 FY21E FY22E EPS 1640 1660 2160 PE 21.3 21 16.2 Source: Select Brokerage Estimates. Market Outlook: Debt Market Data Points: Equity Market Outlook: Present Basis Point Change Particulars Level (%) 3M 6M 1 Year At current levels of 34915, SENSEX is trading at 21.3x trailing 12- India 10 year bond yield 5.88 (25) (67) (99) month earnings of INR 1640. Over the past few years, market rally had been primarily driven by AAA – 10 year Spread 1.17 (20) 9 (1) multiple expansion without accompanying earnings growth. COVID-19 Spread (India 10 year – US acted as a trigger for the expensive valuations to correct and mean 5.22 (23) 59 35 10 year) revert. Based on historical data (past 20-years) for the domestic markets, PE multiple greater than 21x has been considered as Market Overview: expensiveandthemarketshadbeenhoveringinthatzoneforpast3-4 years. Despite the recent rebound, the markets are down ~15 percent Global equity markets continued to rise during the month even as from the peak. COVID-19 infections mounted in some geographies such as the US & certain emerging markets. Market participants remained focused on Some of sectors such as (BFSI, Auto, Consumer Durables), which economic indicators post easing of the lockdown measures, looking for were trading at stretched valuation multiples, bore the brunt of the fall. signs of an early economic rebound. Governments and global central Historically, post such a tectonic shift, new sectors typically emerge as banks continued to provide fiscal and liquidity support. Macroeconomic market leaders. Considering the above, some sectors such as rural, data was mixed as retail sales in the US rose sequentially where US consumption themes (Select FMCG and Agri), IT and utilities have jobless claims rose (topping 47 million in last fourteen weeks) and the favourable risk-reward. unemployment rate for May came at ~13 percent. Going ahead, growth revival would be dependent on how the un- To remain accommodative on the policy side to revive growth, RBI in its lockdown evolves. There remains considerable uncertainty since policy announced in May 20 cut repo rates by 40 bps and announced COVID-19 infections continue to rise and in the absence of any vaccine several measures to support economy in the light of COVID 19 approval till date, could lead to further social distancing measures. This pandemic effect of lockdowns. RBI in the last week of June 20 could have a lasting economic impact. Some other risks such as trade conducted a special OMO of simultaneous purchase and sale of war & geo political tensions continue to linger. In the interim, impact of Government securities. All these measures along with the measures the recent policy responses, reopening of supply chain linkages, announced in the previous months would help the yields remain soft in corporate earnings trajectory / shock and crude / commodity price the near future. trajectory would also be keenly watched. Government of India post announcement of a comprehensive package Considering the risks looming on the horizon and the uncertain of Rs. 1.70 lakh crores in March 2020, which covered cash transfers trajectory of economic growth in the near term, market correction and food security for vulnerable sections of society including farmers, cannot be ruled out from current levels. Increase in market volatility can migrant workers, urban and rural poor extended the food security also be expected but it could also provide attractive opportunities to measures till end of November 2020 indicating additional expenditure of accumulate quality stocks. A gradual increase in allocation towards around 90000 Crores. This is in addition to the fiscal stimulus package equity can be considered with a 3 – 5 year perspective. Equity as an of Rs. 20 Lakh crores announced in the previous month with the focus asset class has proven its ability to deliver superior returns in the long on providing support to MSMEs and also NBFCs that have been hit term. hard by the lock downs. The rupee has been range bound throughout the month reaching the Debt Market Outlook: levels of Rs. 76.21 to close at the levels of Rs. 75.56 by month end. The 10-year G-Sec yields closed at the levels of 5.99% against the The Indian Debt markets have experienced huge FPI outflows in the previous month close of 6.01%. The bond yields were range bound last 3-4 months as a result of heightened fears of coronavirus induced throughout the month post announcement of RBI policy on May 22, global recession. With FPIs opting for withdrawal from riskier 2020. The new 10-year G-Sec issued by RBI, with an cut off yield of investment destinations and investment in safe heavens of dollar driven 5.79% in May 2020 closed at the levels of 5.89% as on June 30, 2020. assets. Growth outlook for economic activity is expected to remain depressed in With systemic liquidity likely to remain in surplus post implementation of H1 2021 with recovery expected only in the second half of the year 20. RBI’s measures we expect bond yields to remain soft in the near term. RBI gave directional guideline on the inflation than giving a specific RBI is also likely to continue with its measures to ease liquidity in the level with availability of limited data for the month of April 20, indicating market. The only concern for the market could be front loading and that the headline inflation might ease in the second half of the year once increase in the borrowings announced by the Government which might the agriculture supply chains get restored in the coming months with lead to moving the rates higher. gradual relaxation of lockdown. Core inflation is likely to ease further Keeping a close watch on the economic data points and the factors due to lower demand as a result of impact on the consumer sentiment. discussed above, we have marginally increased the duration in our Debt Funds and will continue to remain invested in the medium segment of the yield curve in the present scenario mostly in sovereign and AAA corporate bonds only.