Prudent Corporate Advisory Services Limited · NSE:PRUDENT
Prudent Corporate Advisory Services — ICICI Prudential Asset Management Company — Investor Presentation (March 2010)
46 slides from Prudent Corporate Advisory Services's investor presentation, March 2010
Slide 1: Budget and Market Outlook FY 11
Budget and Market Outlook FY 11 *Tarakki does not mean guaranteed future results. All data/information used in the preparation of this material and the outlook on Markets & Products (internal view) is dated and may or may not be relevant any time after the issuance of this material. The AMC takes no
Slide 2: Agenda
Agenda Budget Equity Market Bond Market Recommendations
Slide 3: Budget FY 11
Budget FY 11 y When you spend your money on yourself y Value for Money y When you spend your money on some one else y Cost y When you spend some one else’s money on your self y Indulgence y When you spend some one else’s money on some one else y Who cares ?
Slide 4: Budget FY 11
Budget FY 11 y A Well Balanced Budget y Manage Growth y Target Real GDP Growth of 8.5 % y Maintain Domestic Focused Growth y Consumption y Money in the hands of tax payers y Infrastructure y Increased Allocation for Projects y Efficient Utilization y Inclusiveness y Increased allocation for social s
Slide 5: Budget FY 11
Budget FY 11 y What is the expected average Income of an Indian Family in FY 11 ? y Rs 260,000/- * y Long Term Measures y GST by 2011 y Coal Regulator y No Off Budget Subsidies y Direct Tax Code y Distinguished identity for Rupee y Fiscal Consolidation * assuming 4 persons in a family @ Rs 65000/- p
Slide 6: Why focus on Fiscal Deficit?
Why focus on Fiscal Deficit? y Fiscal Deficit y High Debt y Higher rates y Lower Growth y Higher Inflation y The world was getting divided into Short High Deficit Country , Long Low Deficit Country y Fiscal Consolidation will keep India on the positive List of FII’s
Slide 7: Budget FY 11
Budget FY 11 y Inflationary y Excise Duty Hike y Oil Price Hike y Oil Sector Mess y Minimal Provision of Oil Subsidy y Revenue Deficit y Revenue Deficit as a percentage of Fiscal Deficit is high Source: Budget FY 11 - www.indiabudget.nic.in
Slide 8: Revenue deficit is high
Revenue deficit is high REVENUE DEFICIT / FISCAL DEFICIT 79% 80% 73% 71% 66% 60% 41% 40% 20% FY 09 FY 10 RE FY 11 BE FY 12 BE FY 13 BE Source: Budget FY 11 - www.indiabudget.nic.in
Slide 9: Budget FY 11
Budget FY 11 y Missing the Target is pardonable, but setting a Lower Target is not pardonable y Divestment : Rs 40,000 Crore y 3 G Auction : Rs 35,000 Crore y Subsidy Reduction: ( Rs 14,801 Crore ) y Execution is the Key FY 10 RE FY 11 BE NET TAX REVENUE GROWTH 5% 15% NON PLAN EXPENDITURE GROWTH 16%
Slide 10: Parallel Economy Estimates
Parallel Economy Estimates Source : Times of India Feb 27,2010
Slide 11: No of working days to pay for tax
No of working days to pay for tax Source: Times of India Feb 27,2010
Slide 12: GOI's Balance-sheet
GOI’s Balance-sheet Particulars *Book Value As on **Market Value As on March 31,2009 Feb 26,2010 Rs in trillion Rs in trillion Land 1.17 Physical assets 1.71 46.50 Equity 1.42 Railways 0.95 3.11 Financial assets 5.11 21.51 Total assets 6.83 71.12 Total debt as on 35.15 March 31,2010? *Source: Budget
Slide 13: Agenda
Agenda Budget Equity Market Bond Market Recommendations
Slide 14: From Company Risk to Country Risk
From Company Risk to Country Risk Source: European economics team
Slide 15: Beware of April and May
Beware of April and May 10 Source : UBS, Units: US$ mn.
Slide 16: Problem is in Developed World
Problem is in Developed World Source: Bloomberg, Haver, UBS
Slide 17: Risk Appetite is there
Risk Appetite is there Source: UBS estimates
Slide 18: Asia is undisputed leader
Asia is undisputed leader Source: Haver, CEIC, IMF, UBS estimates
Slide 19: Because it can run on its own
Because it can run on its own Source: Haver, CEIC, IMF, UBS estimates
Slide 20: Inflation is not yet a threat, Globally
Inflation is not yet a threat, Globally Source: Haver, CEIC, IMF, UBS estimates
Slide 21: India will grow rapidly in FY11
India will grow rapidly in FY 11 (% Y oY ) IIP - Ac tu al Estimated path 16 14 12 10 8 6 4 2 0 -2 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 IIP Recovery will be Part base effect and Part genuine Source : ICICI Bank
Slide 22: Indian Growth Equation
Indian Growth Equation y Savings – 35 % y Govt. Deficit – ( 10 % ) y Net Saving – 25 % y Capital Output Ratio -25 % y GDP Growth Rate – 6 % ( Taken For Granted ) y To Reach 8 % y FDI / FII Flows To Add To Savings y To Reach 10 % y Improve The Capital Out Put Ratio y Execution Source: Internal estima
Slide 23: Indian Economy
Indian Economy y Base Growth Rate Around 6 % y Inflation, Infrastructure Bottleneck , Execution Remains Problem Area y Capital Shortage Will Not Be An Issue y Two Step Forward, One Step Backward y On the same growth path like Japan, Tiger economies and China y If Economy Grows, Corporate Profitabili
Slide 24: Indian Market vs. World
Indian Market vs. World Source : Bloomberg Feb 19,2010
Slide 25: Domestic Savings will replace FIIs in Equity Markets
Domestic Savings will replace FIIs in Equity Markets Source : Morgan Stanley.
Slide 26: What to expect in the Market?
What to expect in the Market? Fair Value Market, albeit at higher end Sensex EPS of Rs 1050 for FY 11 Markets trading at around 16 times FY 11 Markets will be looking forward to Earnings Global Event Monsoon Source: Internal estimates
Slide 27: Be an Investor
Be an Investor
Slide 28: Agenda
Agenda Budget Equity Market Bond Market Recommendations
Slide 29: Interest Rate
Interest Rate y Supply y Net Borrowing Program at Rs 3.45 trillion y Bond Market will watch for execution y Inflation y Likely To Moderate from 2 Q FY11 y Liquidity y Likely To Reduce In FY 11 y RBI’s Policy Action y CRR Hike Done y Several CRR / Rate Hike likely In FY 11 y Hike in HTM / SLR to push
Slide 30: Rates Movement
Rates Movement y Unlikely y More Likely
Slide 31: Govt. Borrowing is rising rapidly
Govt. Borrowing is rising rapidly Source: CEIC, First Global Estimates
Slide 32: Size of the Borrowing
Size of the Borrowing y Deposit Growth @ 18 % On Rs 45,00,000 Crore = Rs 8,10,000 Crore y CRR = Rs 46,500 Crore y Net Deposit Growth = Rs 763,500 Crore y Gross Central Gilt Issuance = Rs 482,000 Crore y Gross State Gilt Issuance = Rs 150,000 Crore y Likely Slippage in FY 11 = Rs 50,000 Crore y Total
Slide 33: Indian Inflation: Focus on which one?
Indian Inflation : Focus on which one? Source: Haver, CEIC, UBS Estimates
Slide 34: Inflation
Inflation (% YoY) WPI Actual Estimated 14 Post budget 12 10 Pre Budget 8 6 4 2 0 -2 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 WPI Inflation could inch up between 1% to 1.5 % due to oil price hike and excise duty hikes Source: ICICI Bank
Slide 35: Yields are above RBI Corridor
Yields are above RBI Corridor Source: Bloomberg
Slide 36: Corporate Spreads are at low levels
Corporate Spreads are at low levels Spread at lowest levels Source : Bloomberg
Slide 37: Agenda
Agenda Budget Equity Market Bond Market Recommendations
Slide 38: Recommendations
Recommendations y Fair Value Market y Neutral allocation between Large Cap and Mid cap y All correction are an opportunity to invest, All spikes are an opportunity to book some profit y Recommend y ICICI Prudential Focused Equity Fund (Open Ended Concentrated equity scheme) : Large Cap y ICICI Prude
Slide 39: Recommendations
Recommendations y Prefer Income Opportunities Fund and Monthly Income Plan over Income & Gilt Fund y Income Fund and Gilt Fund will be more attractive from risk return point of view in later part of 1 Q FY 11 y Focus On Carry Products y Medium Term Plan y Long Term Income Plan y Fixed Maturity Plans
Slide 40: ICICI Prudential Medium Term Plan
ICICI Prudential Medium Term Plan An Open Ended Income Fund y 3 Month P1 + CD Rate At 5.95 %* y One Year P1 + CD Rate At 6.65 %* y Spread Of 70 Basis Point y Feb and March are the tightest month y Lock rates for as long period as possible y Open For Subscription Till March 31,2009 Only y Good Carry
Slide 41: ICICI Prudential Long Term Income Plan
ICICI Prudential Long Term Income Plan An Open Ended Income Fund y One Year Rate P1 + CD Rate : 6.65 %* y 2 Year AAA Bond Rate : 7.45 %* y 3 Year AAA Bond Rate : 7.85 %* y Spread Of 120 Basis Point y Ride Down The Yield Curve y Is Market Pricing In Too Much Of Rate Hike ? y Long Term Income Plan Can
Slide 42: Yield Curve is Steep
Yield Curve is Steep SPOT RATES 12 MONTH FWD 9.50 9.2 9.00 8.5 8.3 8.3 8.50 8.7 8.00 7.50 7.8 7.00 7.5 7.3 6.50 6.7 6.00 5.50 12 18 24 36 60 Source: Internal Estimates as on March 4,2010 , Illustration purpose only
Slide 43: Risk Factors
Risk Factors • Statutory Details: ICICI Prudential Mutual Fund (the Fund) was set up as a Trust sponsored by Prudential plc (through its wholly owned subsidiary namely Prudential Corporation Holdings Ltd) and ICICI Bank Ltd. ICICI Prudential Trust Limited (the Trust Company), a company incorporated
Slide 44: Risk Factors
Risk Factors • ICICI Prudential Short Term Plan@ (IPSTP) (An open-ended Income Fund. Objective is to generate income through investments in a range of debt and money market instruments of various maturities with a view to maximising income while maintaining the optimum balance of yield, safety and l
Slide 45: Risk Factors
Risk Factors ICICI Prudential Monthly Income Plan@ (IPMIP) ( An open ended open ended fund. Monthly income is not assured and is subject to the availability of distributable surplus) (Objective is to generate regular income through investments in fixed income securities so as to make monthly/quarte
Slide 46: Thank you
Thank you
ICICI Prudential Asset Management Company — Investor Presentation (March 2010) on 6ix