India Fixed Income Market & Fund Update - Mirae Asset of 3% over the ... CBLO and other debt...

India Fixed Income Market &

Fund Update

August, 2014

For institutional Use Only

I. Indian Economy - Where are We?

II. Debt Market Update - What has happened YTD & Road Ahead?

III. Mirae Asset India Products

Agenda

Indian Economy – Where are We?

India Fixed Income Market & Fund Update, August 2014


Indian Economy – Overview

The Good The Not So Good The Bad

Remittances Corporate Earnings Fiscal Deficit

FII Flows GDP Current Account Deficit

Economic Reforms Currency

CPI Inflation

The Good The Not So Good The Bad

Remittances Currency Fiscal Deficit

FII Flows Inflation – CPI & WPI

Economic Reforms Current Account Deficit

Corporate Earnings GDP Growth

How 2013-14 Looked Like

How 2014-15 may look like


Worst is behind: Mean Reversion has started

GDP Growth… has bottomed-out

4.3

5.5

4.0

8.1

7.0

9.5

9.6

9.3

6.7

8.6

8.9

6.7

4.5

4.7

5.5

6.5

7.2

Growth has already shown signs of bottoming out, and IIP is showing signs of rebounding.

o GDP may accelerate by 150-200 bps in the next 8 quarters

Source: Bloomberg, 31st July, 2014 Source: Motilal Oswal Report, July, 2014

-3

-2

-1

0

1

2

3

4

5

6

Jan

-13

Feb

-13

Mar

-13

Ap

r-1

3

May

-13

Jun

-13

Jul-

13

Au

g-1

3

Sep

-13

Oct

-13

No

v-1

3

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r-1

4

May

-14

IIP Growth Rebounding


Worst is behind: Improving Deficit Situation

With improving quality…Fiscal Deficit

5.7

6.2 5.9

4.5

3.9 4.0

3.3

2.5

6.0

6.5

4.9

5.9

4.9 4.6

4.1

3.6

3.0

FY0

1

FY0

2

FY0

3

FY0

4

FY0

5

FY0

6

FY0

7

FY0

8

FY0

9

FY1

0

FY1

1

FY1

2

FY1

3

FY1

4

FY1

5E

FY1

6E

FY1

7E

Modi government has shown strong commitment towards fiscal consolidation, with fiscal deficit target of 3% over the next 2 years.

US$ billion April-June

FY 13-14 FY 14-15

Exports 73.3 80.1

Growth 9%

Imports 121.6 113.2

Growth -6.9%

Oil Imports 39.2 40.8

Growth 4%

Non-Oil Imports 82.4 72.4

Growth -12%

Trade deficit 48.3 33.1

Growth -32%

Source: Bloomberg, 31st July, 2014

Improving ….Current Account Deficit


Worst is behind: Inflation is Softening

7.31

5.65

4.77 4.58

5.16

5.85

6.99 7.24

7.52

6.4

5.03

6

5.55

6.01

5.43

4

4.5

5

5.5

6

6.5

7

7.5

8

Jan

-13

Feb

-13

Mar

-13

Ap

r-1

3

May

-13

Jun

-13

Jul-

13

Au

g-1

3

Sep

-13

Oct

-13

No

v-13

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r-1

4

May

-14

Jun

-14

WPI Trend

6

7

8

9

10

11

12

Jan

-13

Feb

-13

Mar

-13

Ap

r-1

3

May

-13

Jun

-13

Jul-

13

Au

g-1

3

Sep

-13

Oct

-13

No

v-1

3

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r-1

4

May

-14

Jun

-14

CPI Trend

CPI CPI Urban CPI Rural

India’s WPI Inflation has been close to 5%.

India’s CPI Inflation (the number keenly monitored by RBI) is at a 43 month low.

o RBI Projects CPI to hover between 7-8% by Jan 2015.




In its monetary policy meeting (5th August 2014), the Reserve Bank of India (RBI) held the repo rate steady at 8% -- as was widely expected. It announced a 50 bps cut in the SLR to 22% and reduced the HTM (Held to Maturity) ceiling to 24%. These two measures are targeted towards improving liquidity in the economy and in turn expand credit to productive sectors.

RBI`s commitment to CPI inflation targets and government’s commitment on fiscal consolidation may be positive for bond markets in medium term.

Interest Rates – Stable

Source: Bloomberg, 6th August, 2014

3

4

5

6

7

8

9

Reverse Repo

Repo

CRR


The chart above shows performance of Emerging Market currencies. The Indian Rupee and Brazilian Real have performed significantly better than Indonesian Rupiah, Turkish Lira and South African Rand.

Further reforms by Modi government will have significant bearing on future movement of the INR

INR Currency

Source: Bloomberg, 6th August 2014

90

95

100

105

110

115

120

125

Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14

Rupiah (Indonesia)

Lira (Turkey)

Rand (South Africa)

Rupee (India)

Real (Brazil)


Last week of July ended with rainfall that was 9% below average.

Weather office has predicted above normal monsoon in August

Well distributed monsoon will help shrink the deficit.

Monsoon : Deficit reduced


Oil prices have corrected by around 9% from their recent peak

The Diesel subsidy may also be wiped out in 4-5 months. (assuming oil and currency remain at current levels), which will be hugely positive for India’s Fiscal Deficit situation.

Oil : H ealthy Price Correction

102

104

106

108

110

112

114

116

Jan

-14

Jan

-14

Jan

-14

Jan

-14

Jan

-14

Feb

-14

Feb

-14

Feb

-14

Feb

-14

Mar

-14

Mar

-14

Mar

-14

Mar

-14

Ap

r-1

4

Ap

r-1

4

Ap

r-1

4

Ap

r-1

4

May

-14

May

-14

May

-14

May

-14

May

-14

Jun

-14

Jun

-14

Jun

-14

Jun

-14

Jul-

14

Jul-

14

Jul-

14

Jul-

14

Jul-

14

Oil Price Movement Brent Prices

Source: Bloomberg, 31st July 2014

Indian Debt Market – What has

happened YTD & Outlook?

India Fixed Income Market & Fund Update, August 2014


Current Debt Yields

Source: Bloomberg, 31st July 2014

CD and CP rates been declining since February this year.

The spread between 3-12 month papers is 30 bps. The yield on 3 month CP and 12 month CD rates are the same.


Debt Market Outlook

Budget 2014 in July saw FM, Arun Jaitley sticking to deficit target of 4.1% of GDP as put forth by the previous government in February 2014 interim budget.

RBI cut SLR by 50 bps in its August bi monthly policy review. Apart from this there was no change in policy rates on Repo and CRR. Cut in the held-to-maturity SLR limits may seem negative, but the impact on bonds is going to be minimal as banks already hold SLR securities up to 28%.

Higher rates will help us to attract more FII flows

We have to watch closely - distribution of monsoon, global factors like international commodity prices and future path of US monetary policy.

However RBI`s commitment to CPI inflation targets and government’s commitment on fiscal may be positive for bond markets in medium term.

We expect RBI to cut rates after December if the rains normalize. At the same time, we continue to expect the Modi government to focus much more on supply-side measures to combat inflation.

Fixed Income Funds

For Illustration Purpose Only


Investment Objective: is to generate consistent returns with a high level of liquidity in a judicious portfolio

mix comprising of money market and debt instruments. The Scheme does not guarantee any returns.

Investment Strategy Maintaining High Liquidity: Since the underlying investments will be in Bank CDs, Overnight instruments /

CBLO and other debt instruments linked to short end rates, the fund manager can redeem instruments at a short notice

In terms of credit quality, the fund aims to primarily invest in a mix of highest rated instruments (i.e. A1+ for money market instruments)

We are trying to give stable returns without taking any mark to market and credit risk

Suitable for Investors with Time Horizon of 1 day - 3 Months

Mirae Asset Cash Management Fund - (MACMF) (An Open - Ended Liquid Scheme)

CRISIL AAAmfs Rated ~

High

Medium

Low

Limited Moderate Extensive

Interest Rate Sensitivity

Cre

dit Q

uality


MACMF has 84.57% of its portfolio in CD’s (Public Bank CD’s) and remaining in CBLO. CDs are rated A1+ (Highest Short Term Rating).

The average maturity of the portfolio is 19.45 days. YTM is 8.41% and Modified Duration 0.05 years years (as on 31st July, 2014)

We are trying to give stable returns without taking any mark to market and credit risk. Liquidity is high.

Mirae Asset Cash Management Fund (An Open - Ended Liquid Scheme)

Portfolio Statement as on July 31,2014

Name of the Instrument Rating % to Net Assets

Money Market Instruments

Certificate of Deposit

Syndicate Bank (01/08/2014) ** # CRISIL A1+ 15.94%

Canara Bank (01/08/2014) ** # CRISIL A1+ 10.63%

Allahabad Bank (11/08/2014) ** # CARE A1+ 10.60%

Corporation Bank (25/08/2014) ** # CRISIL A1+ 10.57%

Bank of Baroda (26/08/2014) ** # ICRA A1+ 10.57%

Bank of India (15/09/2014) ** # CRISIL A1+ 10.52%

Oriental Bank of Commerce (08/10/2014) ** # CRISIL A1+ 10.45%

Andhra Bank (08/08/2014) ** # ICRA A1+ 5.30%

Total 84.57%

CBLO / Reverse Repo

Clearing Corporation of India Ltd 16.53%

Total 16.53%

Others

Net Receivables / (Payables) -1.10%

GRAND TOTAL 100.00%

Mirae Asset Cash Management Fund - (MACMF)

The portfolio is subject to change based on fund manager‘s views.


Investment Objective: is to seek to generate returns with low volatility and higher liquidity through a

portfolio of debt and money market instruments. The Scheme does not guarantee any returns.

Investment Strategy In terms of credit quality, the fund aims to primarily invest in a mix of highest rated instruments (i.e. A1+ for

money market instruments, AAA for corporate bonds category) The Fund will try to position itself in the high quality and medium/ low interest rate sensitive debt securities. Suitable for Investors with Time Horizon of 6 -12 Months

Mirae Asset Ultra Short Term Bond Fund - (MAUSTB) (An Open - Ended Debt Scheme)

High

Medium

Low



Cre

dit Q

uality


MAUSTB has 78.8% of its portfolio in CD’s and mutual fund units (mix of Private and Public Bank CD’s) and remaining in CBLO. CD is rated A1+ (Highest Short Term Rating).

The Average maturity of the portfolio is 54.5 days, YTM is 8.5%, Modified Duration 0.15 years (as on 31st July, 2014)

The endeavor will be to offer higher returns, while keeping the liquidity high

Mirae Asset Ultra Short Term Bond Fund - (MAUSTB)

Mirae Asset Ultra Short Term Bond Fund (An Open - Ended Debt Scheme)





Punjab National Bank (11/09/2014) ** # CARE A1+ 15.73%

Indusind Bank Ltd (20/10/2014) ** # ICRA A1+ 15.57%

State Bank of Patiala (08/09/2014) ** # CRISIL A1+ 14.17%

Bank of Baroda (10/12/2014) # ICRA A1+ 10.77%

Syndicate Bank (01/08/2014) ** # CRISIL A1+ 7.94%

Andhra Bank (08/08/2014) ** # ICRA A1+ 7.93%

Indian Bank (25/03/2015) ** # FITCH A1+ 2.40%

Total 74.50%

Others

Mutual Fund Units

MIRAE ASSET FIXED MAT PLAN Sr I 368 day Dir Growth 4.31%

Total 4.31%

CBLO / Reverse Repo


Total 21.03%

Net Receivables / (Payables) 0.16%

GRAND TOTAL 100.00%



Investment Objective: is to seek to generate returns through an actively managed diversified portfolio of

debt and money market instruments. There is no assurance OR guarantee of any returns

Investment Strategy • The fund endeavors to capture the debt market returns based on evolving rate and macro-economic environment.

The fund aims to benefit from current higher yields and potential trending down in yields in medium term. • In terms of credit quality, the fund aims to invest in a mix of highest rated (P1+/A1+) debt/money market

instruments at the short end and AAA and AA category at long end. • The fund will try to position itself in the high quality and medium interest rate sensitive debt securities. • The fund management team will primarily use a top down approach for taking interest rate view, sector allocation

along with bottom up approach for security, instrument selection. The bottom up approach will assess the quality of the security, instrument (including the financial health of the issuer) as well as liquidity of the security.

• Suitable for Investors with Time Horizon of 1-3 Years

Mirae Asset Short Term Bond Fund - (MASTB) (An Open - Ended Debt Scheme)

High

Medium

Low


Cre

dit Q

uality



MASTB has 98.9% of its portfolio in CD’s and mutual fund units (mix of Private and Public Bank CD’s) and remaining in CBLO. CD is rated A1+ (Highest Short Term Rating).

The Average maturity of the portfolio is 202.09 days, YTM is 8.9%, Modified Duration 0.55 years (as on 31st July, 2014).

Mirae Asset Short Term Bond Fund - (MASTB)

Mirae Asset Short Term Bond Fund (An Open - Ended Debt Scheme)





Oriental Bank of Commerce (03/03/2015) ** # CRISIL A1+ 35.19%

Indian Bank (25/03/2015) ** # FITCH A1+ 29.41%

Bank of Baroda (10/12/2014) # ICRA A1+ 10.77%

State Bank of Patiala (08/09/2014) ** # CRISIL A1+ 3.67%

Axis Bank Ltd (23/02/2015) ** # CRISIL A1+ 2.82%

Sub Total 81.85%

Total 81.85%

Mutual Fund Units

MIRAE ASSET FIXED MAT PLAN Sr I 368 day Dir Growth 17.02%

Sub Total 17.02%

Total 17.02%

CBLO / Reverse Repo


Sub Total 2.40%

Total 2.40%

Others

Net Receivables / (Payables) -1.28%

GRAND TOTAL 100.00%



Product Labelling


Statutory Details: Sponsor: Mirae Asset Investments Company Limited. Trustee: Mirae Asset Trustee Company Private Limited; Investment Manager: Mirae Asset Global Investments

(India) Private Limited

Investment Objective: Mirae Asset Cash Management Fund (An open-ended debt scheme): The investment objective of the scheme is to generate consistent returns with a high level of

liquidity in a judicious portfolio mix comprising of money market and debt instruments. The Scheme does not guarantee any returns. Asset Allocation: (1) Money Market Instruments (including

Cash, Reverse Repo, CBLO) MIBOR linked instruments : 20 - 100%. (2) Debt Instruments with residual maturity upto 91 days only : 0 - 80%. Transparency: The NAV will be calculated at the

close of every working day and shall be published in two daily newspapers and on the AMC & AMFI website. Load Structure : Entry Load - N.A. Exit Load - Nil.

Investment Objective: Mirae Asset Short Term Bond Fund (An open ended Debt scheme): The investment objective of the scheme is to seek to generate returns through an actively

managed diversified portfolio of debt and money market instruments. There is no assurance OR guarantee of returns. Asset Allocation: (1) Money Market Instruments and debt instruments with

residual maturity and repricing tenor not exceeding 182 days: 20-100% (2) Debt Instruments with residual maturity and repricing tenor exceeding 182 days: 0-80% (The Scheme may invest

upto 50% of net assets in securitized debt). Transparency: The NAV will be calculated at the close of every working day and shall be published in two daily newspapers and on the AMC/AMFI

website. Load Structure: Entry Load - NA, Exit Load – If redemption within 6 months (180 days) from the date of allotment 0.5% If redemption after 6 months (180 days) from the date of

allotment - Nil

Investment Objective: Mirae Asset Ultra Short Term Bond Fund (An open-ended debt scheme): The investment objective of the scheme is to seek to generate returns with low volatility

and higher liquidity through a portfolio of debt and money market instruments. The Scheme does not guarantee any returns. Asset Allocation: (1) Money Market Instruments and debt

instruments with residual maturity and repricing tenor not exceeding 1 year: 50% to 100% (2) Debt Instruments with residual maturity and repricing tenor exceeding 1 year (including Securitized

Debt upto 50% of net assets): 0% to 50%. Transparency: The NAV will be calculated at the close of every working day and shall be published in two daily newspapers and on the AMC/AMFI

website.. Load Structure: Entry Load - NA, Exit Load – Nil

~CRISIL Disclaimer : A CRISIL credit quality rating on a bond fund reflects CRISIL’s current opinion on the degree of protection offered by the rated instrument from losses related to credit

defaults. It does not constitute an audit by CRISIL of the fund house, the scheme, or companies in the scheme’s portfolio. CRISIL ratings are based on information provided by the issuer or

obtained by CRISIL from sources it considers reliable. CRISIL does not guarantee the completeness or accuracy of the information on which the rating is based. A CRISIL rating is not a

recommendation to buy, sell or hold the rated scheme. It does not comment on the market price or suitability for a particular investor. All CRISIL ratings are under surveillance. The assigned

rating CRISIL AAAmfs is valid only for “Mirae Asset Cash Management Fund”. The rating of CRISIL is not an opinion on the Asset Management Company’s willingness or ability to make timely

payments to the investor. The rating is also not an opinion on the stability of the NAV of the Fund, which could vary with market developments. CRISIL reserves the right to suspend, withdraw

or revise its rating at any time, on the basis of any new information or unavailability of information or any other circumstances, which CRISIL believes may have an impact on the rating.

Certain information contained in this document is compiled from third party sources. Whilst Mirae Asset Global Investments (India) Private Limited has to the best of its endeavour ensured that

such information is accurate, complete and up-to-date, and has taken care in accurately reproducing the information, it shall have no responsibility or liability whatsoever for the accuracy of

such information or any use or reliance thereof. The views expressed herein represents general market outlook and are not based on any assumptions/projections and purely represent the

views of the author. This document shall not be deemed to constitute any offer to sell the schemes of Mirae Asset Mutual Fund. Mirae Asset Global Investments (India) Pvt. Ltd/ Mirae Asset

Trustee Co. Pvt. Ltd./ Mirae Asset Mutual Fund/ its Directors or employees accepts no liability for any loss or damage of any kind resulting out of the unauthorized use of this document.

References to particular sectors, securities or companies are for general information only and are not recommendations to buy or sell a security, or may be a part of author’s holdings/ portfolios

(subject to change without any intimation) of the schemes of Mirae Asset Mutual Fund at any one time.

The presentation is dated 8th August, 2014

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

Disclaimers

Thank you!

India Fixed Income Market & Fund Update - Mirae Asset of 3% over the ... CBLO and other debt...

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Transcript of India Fixed Income Market & Fund Update - Mirae Asset of 3% over the ... CBLO and other debt...