2019OUTLOOK

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+ FOREWORD

EQUITY MARKET OUTLOOK 20192019: India At An Inflection Point

2018: A Roller Coaster Year, India Emerges Resilient

Macro Risks Abating; Corporate Earnings Recovery Finally Visible

GDP Growth Outlook: Investment Growth Showing Nascent Signs of Recovery

Monetary Policy Outlook: Inflation Well Under Control; Hopes Emerge of A Shift in Policy Stance

Currency Outlook: Depreciating Bias To Remain; Cad Situation Improves

Oil Price Outlook

Sector Outlook

Actionable Intelligence: Equity

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DEBT MARKET OUTLOOK 20192018: Quicksilver Markets

2019: Once Bitten, Twice Not Shy

Actionable Intelligence: Debt

Indian General Elections

When Two Fight, The Third Wins

Liquidity

Inflation And Interest Rates

Credit Assets

FOREWORD

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The year gone by was the toughest in terms of making money. Start of the year was marked by high optimism reflected in valuations, which were above historical average by a margin. Rising oil prices, depreciating Rupee, Rising Interest Rate, Default by IL&FS, tight liquidity and FII selling resulted into crash in small and mid-cap stocks and correction in large cap stocks. However, among all the gloom corporate profitability kept on steadily improving.

When everything was looking lost, suddenly oil prices corrected against all expectations. Drop in oil prices brought stability in Rupee and brought back FII flows. OMOs done by the RBI improved liquidity condition from extreme negative to negative. Drop in inflation and US Fed’s unexpected turn around on future course of Fed rate hike pulled Indian interest rates down by a significant number. Appointment of professionals to run IL&FS along with timely action by the government to contain NBFC liquidity squeeze has helped economy regain its growth momentum.

Dear Investor,

Indian economy is at an interesting stage. Last few years structural reforms like GST implementation, Demonetisation, Insolvency Laws, Transparent Auctioning of Public Resources, Digitisation, Formalization of economy through expansion of tax base etc. have created short term pain in terms of disruption and higher compliance cost. The long term benefits of the same are likely to accrue in the years to come - 2019 and beyond.

Indian economy also went through a transition where the RBI was transitioned from being an all-rounder to a specialist. Before 2016, the RBI was managing with remarkable success conflicting objectives like Rupee, Growth, Interest Rates, Inflation and Banking Sector stability. We ignored the adage Don’t repair what isn’t broken. We adopted western world standard of inflation targeting and mandated the RBI to manage Inflation and Growth. In the early days, to establish the credibility as Inflation Hawk and bring down the double digit inflation, the RBI controlled quantity of liquidity as well as price of liquidity. Real interest rates remained high and banking liquidity remained tight to bring down inflation within the mandated range. While RBI was extremely successful in bringing down the inflation, the inflationary expectations remained higher. High inflationary expectations pushed the RBI to pursue tighter monetary policy, this put a speed breaker on growth as quantity of liquidity and price of liquidity remained non supportive. Around same time the RBI started cleaning the banking system from the menace of non-performing loans which was long overdue. In absence of adequate capital , cleaning up took its toll on transmission of Credit depriving sectors like real estate, infrastructure, construction and NBFC of vital credit flow: 2018 was a year where Indian Economy ran with a hand brake on.

But we believe that credit events of 2018 were one-off incidences and spread assets with their risk – reward trade-off offer an attractive investment opportunity in 2019. As the liquidity eases, the same is likely to be reflected in the spread of good credits be it AAA or otherwise. With crude and inflation remaining stable, the RBI MPC is unlikely to hike interest rates in the near future. In fact a situation is emerging which may lead to markets discounting  rate cuts, instead. Today India, has one of the highest positive real interest rates and we expect an increase in financial savings which will boost liquidity for the formal lending sector. We expect credit risk funds and duration funds (which are overweight on corporate bonds) to outperform in 2019.

There is an exciting opportunity in front of India through US China tariff war. In the 80s India and China were of similar size. China became manufacturer to the world. We missed the bus. Today China is about six times bigger than India. Due to tariff war many companies are moving out of China. If India can attract those manufacturers, our exports can take a quantum jump and we can expand manufacturing base to create inclusive and faster growth. 

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FOREWORD

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Indian economy can move to double digit growth in years to come due to the structural reforms undertaken in the past. However it will require supportive liquidity, smoother transmission of credit and reasonable interest rates. With RBI keeping inflation in control, this may be possible. It also requires capturing supply chain disruption unleashed by the US China tariff war that can help expand our manufacturing base. Indian economy looks well poised for 2019 and beyond due to low inflation, fairly valued Rupee, under control fiscal and current account deficit and improving banking system. Obviously oil price movement will continue to play a crucial role in impacting Indian economy.

Market movement tracks corporate profitability trend. Better liquidity, lower real interest rates, fair value currency, smoother credit flow and improving capacity utilisation is likely to support higher corporate profitability growth in 2019. The Indian economy, which was running on consumption engine can get a boost from investment side in 2019. With the correction in 2018, valuations look fair. Small and mid-caps look a little better valued than large caps. Domestic flows slowed down in 2018 over 2017 by a significant amount. Hopefully they will be maintained at the same level in 2019 which will support the market. FII flows turned negative in 2018. It is difficult to take a call on the FII flows in 2019 as there are conflicting factors. Our weight in MSCI EM Index could be reduced adversely impacting flows. India has outperformed other EMs by a big margin. Our valuation is at a historically high premium to other EMs because of that outperformance India is expected to be the fastest growing major economy in the world. All these factors are likely to impact FII flows.  

In the past two decades election results have created material impact on market on the day of election result. Over the course of the remaining period elections usually don’t make material impact. The General Election result is likely to impact market on the result day. Today market is pricing in a stable government which is expected to pursue the path of higher growth.  

From an opportunity point of view 2018 was an English or Australian Cricket pitch where making runs were difficult. 2019 could well turn out to be like an Indian Cricket pitch where making runs might be easier. However the basic technique of making runs will remain the same. 2019 looks promising for making money. The basic tenet of long term investment and disciplined investment through asset allocation is likely to hold good for investors.

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Wishing you all a Very Happy and Prosperous

Nilesh ShahManaging Director Kotak Mahindra Asset Management Company Limited

+2019

EQUITYMARKETOUTLOOK2019

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- Benjamin Graham

It’s time once again to ring out the old and usher in the new. With an eventful 2018 coming to an end, it is time to pause and retrospect on the year gone by and also gaze into the crystal ball to identify key investment themes for 2019.

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Successful investing is about managing risk, not avoiding it

2019INDIA AT AN INFLECTION POINT

2018: A ROLLER COASTER YEAR, INDIA EMERGES RESILIENT

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The markets were however rocked by the Nirav Modi scam in February 2018 which resulted in the Indian banking system being hit by almost INR140Bn (USD2Bn).

The RBI too withdrew all restructuring dispensations which were earlier available to banks with respect to non-performing loans (NPLs) resulting in a sharp spike in NPL classification and higher credit costs.

The year also saw very sharp movement in crude oil prices all of which had a bearing on domestic macro and the currency. Crude oil prices that stood at USD66/bbl on Jan 1,2018, touched a high of USD86/bbl on Oct 3, 2018 and has since fallen to USD59/bbl.

Those entities running Asset – Liability mismatches were the hardest hit. The situation however improved considerably towards the end of the year with RBI providing liquidity support to the system through OMOs (Open Market Operations) and companies resorting to asset sell downs.

+The month of September 2018 also saw the beginning of the liquidity crisis in the NBFC (Non-Banking Financial Services) sector brought on by the default by IL&FS (Infrastructure Leasing and Financial Services). The NBFC sector which had been growing at a fast pace, saw a sudden liquidity squeeze resulting in slow down of growth and apprehensions of credit defaults.

NPLs

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almost akin to a roller coaster ride. However, lo and behold, we have survived and emerged stronger. The year started on an optimistic note, with expectations of recovery in both domestic GDP growth and corporate earnings.

During the year, GDP growth did recover after bearing the impact of GST (Goods and Services Tax) implementation in the previous year. Real GDP growth in H1FY19 stood at 7.6%. Corporate earnings trajectory too improved after almost 3 years of flat growth. So far in HIFY19,

2018 was an eventful and tumultuous year,

Nifty companies have recorded profit growth of

(As on Dec 18, 2018)

~12% YoY

2018

Beginning of the liquidity crisis in the NBFC

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The flows into mutual funds proved to be sticky with investors adopting the SIP (Systematic Investment Plan) route for their investment requirements.However, the divergent trend between the Domestic Institutional Investors (DIIs) and FIIs continued. CYTD, while DIIs were net buyers of Indian equities to the -

+Mutual fund flows were resilient throughout the year that provided support to the markets even while Foreign Institutional Investors were net sellers.

FIIs were net sellers to the tune of

2018: A ROLLER COASTER YEAR, INDIA EMERGES RESILIENT

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tune of USD 15.9Bn,

USD 4.4Bn (figures till Dec 18, 2018)

Indian banking system being hit by almost INR 140Bn

FEB

SEPT

OCT

DECCrude oil prices touched a high of USD86/bbl

Investors adoptingSIP route

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NBFC

CYTD (till Dec 18, 2018), the large cap Nifty

Index Was

up 4.5%

down ~16.18%

while Nifty Midcap 100 Index was

As the year ends, we have a new RBI Governor- Mr. Shaktikanta Das. While the risk of a full-blown trade war between US and China remains, the fears appear to have ebbed considerably.

+ Corporate asset quality stress appears to be stabilizing, inflation is well under control and crude oil prices have come off sharply from its highs, all of which is lending support to various macro- economic variables.

USD 393Bn

+Oil prices which peaked at USD 86/bbl in October 2018 appear to have stabilised even digesting the OPEC resolution to reduce oil production by 1.2mbpd.

The forex reserves of the country at

also provides comfort in event of external sector vulnerability.

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While we cannot rule out volatility in crude oil prices in CY2019, at USD65/bbl oil prices, our expectation is that the Current Account Deficit (CAD) in FY20E would range between 2.3-2.4% of GDP, which appears manageable.

Over the last couple of months, several macro variables have undergone a reset in India. These include crude oil prices and hence the currency trend, appointment of the new RBI Governor, lower than expected inflation trajectory and G-Sec yields dropping by 75 bps from the peak.

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2019: INDIA AT AN INFLECTION POINT MACRO RISKS ABATING; CORPORATE EARNINGS RECOVERY FINALLY VISIBLE

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Corporate asset quality stress also appears to have peaked out and there are visible signs of large ticket asset resolutions under the Bankruptcy Code. All of this bodes well for India.

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OIL OIL

OILOIL

Dec'13109.95

Dec'1537.28

Dec'1656.82 Dec'17

66.73

Dec'1857.59

Dec'1455.27

Implementation of the Goods and Services Tax in 2017 was by far one of the biggest tax reforms that our country has seen.Since then, a number of teething issues relating to rates and infrastructure have been smoothened out.

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2019: INDIA AT AN INFLECTION POINT MACRO RISKS ABATING; CORPORATE EARNINGS RECOVERYFINALLY VISIBLE

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is clearly the General elections scheduled in the first half of the year. Over the long run, general elections have had no visible impact on market direction.

However, the upcoming elections in Apr-May 2019 could keep the market on tenterhooks in the near term. The market is hoping for the return of a stable government at the centre which would help keep the reforms momentum going in the country.

The 8 MFY19 monthly run-rate for GST collections is ~INR 900Bn (~USD 12.92Bn). While this is lower than the required run rate of INR 1.04Tn (~USD 14.93Bn) as per central and states’ budget estimates for FY19, we expect that this would see improvement with better compliance and ease of filing.

The big event for 2019

+Over the last few years, the Midcap index outperformed the Nifty and consequently there was a huge difference in valuations of midcaps vs the large caps. The recent correction in midcaps has brought the relative midcap valuation v/s the Nifty back to 2014 levels (which was the time when this current leg of the midcap bull run started). Similar is the case for small cap valuations v/s the Nifty.

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With improving corporate earnings, we would continue to follow our investment philosophy of Growth at a Reasonable Price (GARP) with an aim of investing in companies which have the potential to report earnings growth higher than the market, a strong balance sheet position and a stable management.

+Against this backdrop, we expect the large cap Nifty Index to report ~10-12% earnings growth in FY19E and 16-18% in FY20E with a large chunk of the earnings improvement likely to be driven by corporate banks.

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TIME FOR MIDCAPS TO SHINE AGAIN?

2019: INDIA AT AN INFLECTION POINT MACRO RISKS ABATING; CORPORATE EARNINGS RECOVERYFINALLY VISIBLE

Another data point suggests that the rolling 1year return difference between NIFTY and NIFTY Midcap 100 is also at an historical extreme.

With the froth in the mid and small cap space now having been wiped out, we would be selectively looking at investments in quality midcap companies with good management, healthy balance sheets and high growth.

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Actionable Intelligence: Debt

Sharp and sustained rise in oil prices is a key risk to the near term growth story for India

Full blown trade wars between the US and China

Impact of any credit crisis in the domestic banking system

Any political instability as a result of the outcome of the general elections in 2019

With this backdrop, we urge investors to keep investing through mutual funds in a systematic manner for the medium to long term keeping in mind individual risk profile and return expectations.

Chart1: Midcap relative valuations v/s nifty have corrected back to 2014 levelsMidcap 12 Month forward PE relative to Nifty 12 Month forward PE

Sharp slowdown in US or world GDP growth

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Jan-14 Jul-14 Feb-15 Aug-15 Mar-16 Sep-16 Apr-17 Oct-17 May-18 Nov-180.9

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Nifty Midcap 12m forward PERelativeto Nifty 12m forward PE

Average

*2014 lows- Beginning of themidcap bull market

Midcap relative valucation v/s Nifty back to 2014 zone when this leg of midcap bull run had begun

Key Risks

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2019: INDIA AT AN INFLECTION POINT MACRO RISKS ABATING; CORPORATE EARNINGS RECOVERY FINALLY VISIBLE

Source: Bloomberg

Key Risks

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Actionable Intelligence: Debt

6.0%Q1FY18 7.0% - 7.1%FY19E 7.2% - 7.3%FY20E

GDP 7.6%Growth

Q1FY19

GDP GROWTH OUTLOOK: INVESTMENT GROWTH SHOWING NASCENT SIGNS OF RECOVERY

The steady pickup in the investment to GDP ratio seen in the last few quarters bodes well for future capex recovery. So far, the growth in the infrastructure sector has been ledby public capex largely limited to the areas of roads and railways. Within public sector capex state governments account for nearly 40% of total public sector GFCF. However, now we do see green shoots of private capex recovery. This is on the back of:

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2018 was an eventful and tumultuous year,

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EARLY SIGNS OF A RECOVERY IN INVESTMENT GROWTH?

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Real GDP growth in India for H1FY19 stood at 7.6%compared to 6% in the same period last year. For the year as a whole, in FY19E we expect real GDP growth to be in the range of 7.0%-7.1% with growth improving marginally to 7.2-7.3% in FY20E.

While we remain positive on the buoyancy of the rural economy and industrial recovery, we do expect some slowdown in consumption expenditure from here on.

This is partly on account of the impact due to the tighter financial conditions on credit availability in the system. However, we do expect that some of the slowdown in consumption expenditure would be offset by improvement in gross fixed capital formation (GFCF).

Banks are now seeing signs of corporate sector stress plateauing out

Capacity utilization levels have increased across sectors and are closer to long term averages. This is true for sectors like steel, power, cement, refineries, airports and autos.

Gross fixed capital formation growth is also consistent with the strong performance registered by infrastructure/construction and capital goods segments in the IIP (Index of Industrial Production) index.

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From an overall Monetary Policy framework, we do not see much changing. The Monetary Policy Committee (MPC) brings institutional continuity to policy rate action. RBI projects that the headline CPI inflation would range between 2.7-3.2% in H2FY19 and 3.8-4.2% in H1FY20. The significant downward revision in inflation estimates for H2FY19 is a reflection of the recent downward movement in food prices (especially perishable items).

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With the expectation that headline CPI inflation would remain below the RBI’s targeted rate of 4% (+/-2%), we expect that policy rates would stay on hold for some time with the possibility of even a rate cut if inflation stays sustainably below the targeted range. The key to watch out for would be the stance of monetary policy which is currently stated as ‘calibrated tightening’.

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2018 was an eventful and tumultuous year,+On December 10, 2018, the RBI Governor Mr Urjit Patel decided to step down, with immediate effect, with a short note citing personal reasons. The resignation of the RBI Governor did come as a surprise to us considering that there has been no similar instance in the recent past of a RBI Governor resigning. While the resignation took the market by surprise, leading to concerns over the independence of RBI as an institution, the quick announcement of the appointment of the new Governor has helped allay the fears of the market participants.

The government has since appointed Mr. Shaktikanta Das – a seasoned Ministry of Finance bureaucrat – as the new RBI governor. Mr Das was the Revenue secretary in 2014 in the Ministry of Finance. He went on to become the Secretary, Economic Affairs in 2015.

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More recently, he was India’s Sherpa at the G20 meet and also a member of the 15th Finance Commission that is looking into the split of the central taxes between states and centre.

Mr. Das is a veteran communicator and seasoned policy maker. Our hope is that his appointment would be likely to result in better policy co-ordination and lead to more engagement with stakeholders.

Removal of some of the PSU banks out of PCA (Prompt Corrective Action framework)

Special liquidity window for NBFCs

Role of the RBI board in the future

As the new governor settles in, we would wait to get more clarity on the following issues:

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NBFCs

RBI

MONETARY POLICY OUTLOOK: INFLATION WELL UNDER CONTROL; HOPES EMERGE OF A SHIFT IN POLICY STANCE

Announcement of a special dividend and determining an adequate level of capital for RBI (a committee to be set up)

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Chart 2 : Cross currency movement against USD (% )

Source: Bloomberg, Period: 29 Dec 2017 to 14 Dec 2018

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CURRENCY OUTLOOK: DEPRECIATING BIAS TO REMAIN; CAD SITUATION IMPROVES

2018 was an eventful and tumultuous year,

+CY18 saw the Indian currency depreciate by ~11% (till Dec 14, 2018). India was however not alone. The volatility in crude oil prices and the strengthening of the US Dollar resulted in emerging market currencies (including India) weakening against the USD.

+Crude oil has now settled ~USD 60/bbl mark. While we cannot rule out the possibility of volatility, we estimate that the Current Account Deficit (CAD) would stand at ~ 2.7% of GDP in FY19E (oil averaging ~USD71/bbl) and improve to 2.3-2.4% of GDP in FY20E (at USD 65/bbl of crude oil for FY20)

Currency movement in CY19 would largely be a function of the movement in the USD as well as portfolio and FDI flows into the country. After a period of high US GDP growth on the back of tax cuts and fiscal stimulus, the outlook for US GDP growth in 2019 is unclear.

In the event that growth in the US slows down substantially from current levels, the pace of interest rate hikes by the US Federal Reserve too may be slower. With the current account remaining in deficit, the onus is on the capital account to fund the same. With this backdrop, we are building in 2-3% depreciation of the INR/USD for 2019.

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+ We expect oil price to average out somewhere between

for 2019.

US$ 60-70/bbl

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We expect oil to inch up from current levels as the OPEC production cut of 1.2 mn bpd will take effect and Iran’s oil exports could taper down after the 6 months relaxation window ending in May’19. However, the bigger factor at play will be OPEC’s action on production cuts or rolling back the same which could keep oil prices in a band although a wide one.

+ Towards end of 2019, effects of International Monetary Organisation (IMO) 2020 regulations are likely to play out for oil market. There could be higher volatility and wider differentials between light-heavy crude prices. Oil prices could gain strength derived from higher demand for middle distillates.

stoked by trade war if it continues, can pose downside risk to oil demand.

Geopolitical risks are likely to persist in 2019 viz. Iran sanctions by US post May’19, US-China trade tensions and political strife in fragile five producers viz. Iran, Iraq, Libya, Venezuela and Nigeria.

Global GDP slowing down,

OIL PRICE OUTLOOK

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SECTORAL OUTLOOK

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BANKING SECTOR: CHANGING LANDSCAPE; PRIVATE SECTOR BANKS TO GAIN FURTHER MARKET SHARE

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The Banking and Financial Services sector saw an interesting 2018 to say the very least. The NBFC (Non-Banking Financial Services) space hit turbulence in the month of September 2018 on the back of the IL&FS crisis and liquidity tightening in the system. Since then the situation has improved with better liquidity availability in the system.

It does appear that the pieces of the jigsaw puzzle are finally fitting in for private corporate banks. The private corporate lenders have seen a change in management at the top and this could be a precursor of things to come. These banks have also started seeing signs of moderation in slippages that peaked in Q4FY18. The game changer clearly has been the Bankruptcy Code. While the pace of resolution has been slower than earlier anticipated large ticket accounts are now close to resolution or have been resolved. The resolution of cases in List 1 of the National Company Law Tribunal (NCLT) cases itself May result in decline in systemic Gross NPLs to the tune of 10-15%.

Any discussion on the sector is incomplete without examining the impact of technology disruption on traditional banks. Bill Gates famously said, “Banking is necessary, banks are not”. In this ever-evolving financial services landscape, the innovators and challengers are different from the leaders of today and the competition is coming from unknown territories. Those tech savvy banks that have understood the need for spending on technology and collaborating with some of the innovators are the ones who will are likely to survive.

The key question is whether the tide is

turning for the private corporate banks. Can

private sector corporate banks rise like the

phoenix from the ashes?

Disruption in banking and the impact of FinTech

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Our view is that this crisis would lead to the separation of the men from the boys and result in the stronger NBFCs becoming even stronger. Those NBFCs and HFCs (Housing Finance Companies) which have been prudent and running matched asset-liability profiles on their balance sheet, those with a focus on risk management and a granular retail book along with a strong parentage, would emerge stronger.

We continue to remain structurally positive on retail private sector banks. Further, the market share shift between PSU banks and private sector banks that started a few years ago accelerated in CY18 and the trend is likely to continue in CY19. Between FY10 and FY18, PSU banks have seen their loan market share fall from 77% to 65%. We now believe that Private sector banks would gain market share not just from PSU banks but also from select NBFCs and HFCs.

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SECTORAL OUTLOOKTECHNOLOGY: SIGNS OF GROWTH RETURNING IN LARGE VERTICALS; GLOBAL MACRO LINKAGE HIGH

Technology was among the best performing sectors in 2018. The growth for midcap companies however far exceeded the large cap names reflecting their ability to be agile and bring on board new capabilities in a changing digital world.

The key risks to watch out for include any sharp slowdown in growth in the US, further rise in protectionism and currency movements.

The improvement would however be a slow and steady one and is partly dependent on the growth outlook for the

US economy in 2019.

In 2019, we expect to see some improvement in revenue growth momentum on the back of improvement in spend by the Banking Financial Service Industry (BFSI) vertical (especially banks in North America) and higher spend on digital.

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+Structurally the sector still faces challenges as the nature of IT services shifts from traditional application development and maintenance work to more discretionary spends with a focus on digital, cloud, analytics and consulting led projects. Automation is also the name of the game given pricing pressure. The changes in visa related rules in the US has also led many companies to increase their onsite presence and create a pyramid structure.

+While all of this has resulted in pressure on margins, the sharp depreciation of the INR v/s the USD in 2018 has been a tailwind for the sector during the year. On a longer-term basis, we have however noticed that currency depreciation does not necessarily lead to margin uptick. From hereon we are building in a mild depreciation of the currency against the USD.

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We acknowledge that valuations in the sector are still attractive and most of the companies generate significant cash flows and earn high ROEs. Further, companies have been typically maintaining high payout ratios through either dividends or buy backs. The growth revival for the sector would take placeonly at a slow and steady pace, our focus would be oncompanies which have a higher proportion of revenues coming from new age digital projects and have been able to carve a niche out for themselves.

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+Domestic oil marketing companies (OMCs) are likely to remain susceptible to Govt. policies as we approach General Elections. Government’s interference in determining retail pricing cannot be ruled out. Also, Government’s order to OMCs to cut margins on petrol and diesel by Rs 1/lt may not be reversed soon. Better clarity on the outlook for OMCs will emerge around mid-2019 when election outcomes and policies of the then Govt. will be clear.

+ Gas sector, on the other hand, is likely to enjoy a stable environment. While inclusion of natural gas under GST is likely to get delayed post General Elections, gas sector may still continue to be a focus area for the Government and city gas distribution companies are likely to continue their work on expanding CNG outlet network and increasing number of piped gas connections. Stable gas prices for six months against fluctuation in prices for alternate fuels is most likely to incentivize usage of natural gas.

+Lower oil price will also help reduce fuel and loss cost which will add to the gross refining

margins of the refiners.

SECTORAL OUTLOOKOIL & GAS: HEIGHTENED OIL PRICE VOLATILITY AND POLITICAL RISK TO STAY

We expect oil prices to recover from the current levels and average around USD 60-70/bbl. High oil price recovery is expected to be driven by OPEC production cuts taking effect.

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Global oil demand is expected to be steady at ~1.5 mn bpd. However, this could have some risk on the downside if global GDP growth falters. Demand growth at ~1.5 mn bpd is expected to be positive for the refining sector if it keeps pace with the capacity additions.

However, there could be divergence in the margins for the players in second half of 2019 as we approach IMO 2020 regulations. Complex refineries with lower bottom end yields and higher heavy crude intake will hold significant advantage against simple refineries as we expect light-crude differentials could widen driven by higher demand for middle distillates like diesel to replace marine bunker fuel.

We have a cautious view on oil companies at present due to oil price volatility and policy risk and we will reassess our view as risks subside partially. We maintain our positive view on gas utilities.

OIL

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SECTORAL OUTLOOKMETALS: BETTER MACRO ENVIRONMENT EXPECTED LATER IN THE YEAR

Risk-reward have now become favourable with recent

underperformance in the sector. Though valuations have now become reasonable, operating environment

have become more challenging.

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Recent weakness in the sector was driven by trade war fears, slowing of Chinese economy, less severe capacity cuts in China during winter and domestic demand not growing at expected rates. However, we expect these factors should correct in coming months and we can have a more positive outlook for the sector later in the year.

We currently prefer non-ferrous sector over ferrous sector. Disappointment in the ferrous sector on demand and supply cuts has been more compared to non-ferrous sector.

Aluminium prices may not have much downside from current levels and we could see prices higher than US$ 2000-2100/t. We expect recovery on the back of cost support and better Chinese demand next year.

Zinc prices had seen sharp correction in 2018 after start of new mining capacities. We expect Zinc prices to be now stable at

USD 2500-2700/t.

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The period also witnessed approval/award of ambitious projects like Bharat Mala, Navi Mumbai Airport, and Mumbai Trans Harbour Link (MTHL) project. This is further aided by large State projects that includes Nagpur-Mumbai Samruddhi Expressway (Maharashtra), Purvanchal Expressway (UP) and approval for Coastal road project in Mumbai.

SECTORAL OUTLOOKINFRASTRUCTURE: ON A STRONG FOOTING

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Over the past few years, there has been a massive thrust by Government to increase spending on Infrastructure, not only in roads but other verticals like Railways/Metros, Housing, Airports, Water, etc. The budget expenditure on these segments have moved up from INR922bn (~USD 13.24bn) in FY16 to INR1.96tn (~USD 28.14bn) in FY19E, indicating a quantum jump.

We would prefer to play construction theme vs asset owners given better business profile, low capital intensity, better asset turn and relatively lower risk profile.

However, there has been certain slowdown in ordering activity given upcoming election, the outlook is promising with potential approval/award of large projects like DMIC (Delhi- Mumbai Industrial Corridor), River inter-linking, and expansion of regional airport infrastructure, etc. Most construction companies have already seen meaningful increase in their order book position, which is likely to drive the execution over the next few years.

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SECTORAL OUTLOOKCHEMICALS: LONG RUNWAY AHEAD

2018 was an eventful and tumultuous year,+We believe that the Indian chemicals industry is set for a strong sustainable growth led by healthy domestic demand, backed by GDP progress, and rising per capita income. Trade Wars and crack down on pollution in China may provide a greater impetus for domestic companies to invest in new greenfield capacities and undergo brownfield expansion so as to further integrate with global supply chains.

+Incrementally companies are investing in technology platforms, R&D, and IPR, in order to differentiate, create greater customer value, and develop strategic partnerships with customers.

+With the Indian rupee depreciating vs the US dollar in CY18, expect the profitability of speciality chemical producers is likely to improve in CY19 as most of the players operate on import parity prices for India, and for global markets the prices are largely set in US dollars.

+As India has a single digit market share in the global chemicals

industry, strong growth on a small base is expected.

20

SECTORAL OUTLOOKMEDIA: DISRUPTION TO THE FORE

2018 was an eventful and tumultuous year,

+While we continue to expect spending on the media and entertainment industry to grow faster than GDP, we expect the profitability margins to contract in CY19 as competitive intensity peaks with costs rising faster than revenues.

+While the Media and Entertainment industry continues to grow ahead of GDP, the sector is undergoing disruption. Disruption is from technology leading to a paradigm shift in terms of distribution through digitization coupled with regulatory frameworks being changed by authorities.

+ This change is leading to uncertainties in terms of value creation going forward. While customer spending including both time and money continues to be on a rise, the traditional players in the media and entertainment industry are in a flux as technology and telecom companies make a play for this lucrative market.

+The largest segment i.e. TV is likely to be impacted in CY19 by the TRAI tariff order mandating a-la-carte offerings on linear TV on one hand and on the other side broadband penetration and digitization is leading to a proliferation of Over-The-Top (OTT) platforms vying for the customer mindspace by overspending in creating original content.

+The traditional distribution players are being subjected to heightened competitive activity with telecom players entering the space.

Print is incrementally losing the classifieds business to the digital players. The exhibition space is however seeing consolidation which should be healthy for the long run.

+

21

SECTORAL OUTLOOK

+

CONSUMER: MIXED BAG

SECTORAL OUTLOOKAUTOMOBILE: BUMPY RIDE AHEAD

+

+

FMCG sector has seen good growth over the last year on improved rural growth and a weak base on account of GST implementation in CY2017. We start CY19 with a strong base and most FMCG players may find it difficult to repeat last year’s performance.

+We remain positive over the medium to long term prospects of the automobile sector.

The sector is a direct beneficiary of the rise in per capita income which is growing amongst the fastest in the world.

+Rural may continue to provide the growth on account of election led spending, farm loan waivers and higher minimum prices for crops. Price hikes are likely to be few as we witness the sharp fall in key commodities as well as agri commodities.

We also see some benefits of shift from unorganised to organised players helping select companies in what looks like a lack lustre 2019 for FMCG.

We see premiumisation across categories coming to the rescue of

FMCG players by helping the realisations move up.

+

The near term challenges in the wake of a) slowdown in urban demand on account of increase in taxi aggregators, b) near the end of cyclical growth for MHCV and tractors and higher compliance cost ( BSVI transition by April 2020) are likely to see the growth tapering off meaningfully. Government intervention by making higher credit availability, incentive to phase out old vehicles and increase in the disposable income (lower taxes) may result in better growth for auto sector.

22

+

SECTORAL OUTLOOK

23

PHARMA: DOMESTIC BUSINESS PLACED BETTER THAN EXPORT BUSINESS

For Indian pharma companies with large US generic sales, base growth continues to be a challenge as competition remains high though it has become stable. Growth and profitability would vary between companies based on the launch pipeline. Companies which have differentiated complex pipeline have may see better growth.

+ Indian companies have increased the complexity of their filings. However, development cycle of these products is longer. The shift towards complex portfolio would be gradual.

+Growth in the India business has been weak in 2017 because of ban on Fixed Dosage Combinations and continuous impact of price control. In 2019 we expect India business growth to improve to double digits for the sector.

Overall we expect players with USFDA compliant facilities and large number of pending ANDAs to do better than peers.

+

We expect that players with higher exposure to India compared to peers would have better growth.+

Large project ordering would pick up only after the general elections. For FY19, we expect revenue growth to be better for the sector. Margins are expected to remain steady as cost increase have been passed on.

Product companies with higher exposure to early cycle capex would have better growth than project companies.

SECTORAL OUTLOOK

24

CAPITAL GOODS: EXPECTING GRADUAL RECOVERY

Last few years have been disappointing for the sector as order inflow was muted.

There has been revival in base orders in 2018 for most of the companies, however large project orders are still few and far between.

Private greenfield capex has still not picked up but government capex remains steady.

+

+Consumer durables have seen structural growth over last few years and we expect this to continue in the medium term. Margins are expected to remain steady as gains from operating leverage would be invested back into advertising and promotion.

Quality product, right sizing (Area and Total price), strong brand recall and healthy balance sheet are likely to turn out to be key success factors in the sector.

Commercial and Retail space are also witnessing better acceptance only for Grade A properties in select markets and shift from small developers to large organised players.

SECTORAL OUTLOOK

25

REAL ESTATE: BRIGHT OUTLOOK DESPITE RECENT WOES

+

+

Real Estate sector has been going through a churn, specifically on Residential front. Amongst the key change is enforcement of RERA Act, which has redefined the way in which the business is done.

+While the demand for “right ticket size apartment” has been holding up, that for premium/luxury segment has diminished at rapid pace. This is partly owing to removal of income tax exemption allowing unlimited losses for multiple house properties.

Excess supply in few major markets, rise in yields have further impacted demand. There is however a silver lining amidst the darkness for organised developers.

Upfront approval and related cost, buyer preference for quality and brand, and lack of large national level player offers humungous opportunity.

The consolidation process has begun and it is only likely to accelerate further with recent liquidity crisis of NBFC sector. Many large corporate groups have evinced their interest in the space, which bodes well from a medium to long term point of view.

+

+

+

ACTIONABLE INTELLIGENCE: EQUITY

26

Key Theme Remarks

Large Cap – play on buying sectoral leaders that benefit from improving investment climate

Kotak Bluechip Fund(Erstwhile Kotak 50)

Infrastructure revival – “True-to-label” fund – recent thrust of government to revive the infrastructure theme

Kotak Infrastructure & Economic Reforms Fund

Through SIP in Midcap oriented scheme Kotak Emerging Equities Fund

ELSS – Equity allocation with ability to reduce tax outgo Kotak Tax Saver Fund

Opportunities in smallcap segment Kotak Smallcap Fund

Balanced – benefit from equity & debt allocation Kotak Equity Hybrid Fund(Erstwhile Kotak Balanced Fund)

Balance of IQ and EQ

Diversified/Multicap – focus on sectors that are likely to benefit the most across market cap

Kotak India EQ Contra Fund(Erstwhile Kotak Classic Equity)

MulticapKotak Standard Multicap Fund(Erstwhile Kotak Select Focus)

Large and Midcap

Kotak Equity Opportunities Fund(Erstwhile Kotak Opportunities Fund)

Dynamic Equity Allocation – Freedom from managing equity debt allocation manually

Kotak Balance Advantage Fund (KBAF)

DEBTMARKETOUTLOOK2019

3

DEBT MARKET OUTLOOK 2018 – 2019

2018: QUICKSILVER MARKETS

In another week, 2018 and the curious case of Silent Aggressive Central banker shall draw to an end and we shall be staring into the face of a brand new calendar year.

+

The month of January is named after the two-headed Greek God Janus, the God of beginnings. Just as one head of Janus looks back upon the year past the other head looks forward to a New Year – it is only fitting that we reflect upon the Year Past before making any divinations about the Year Future.

+2018 saw markets

everywhere, globally as well as

domestically, behave like quicksilver – ever-shifting and

unpredictable

This year has been one of the worst on record in this decade for global bond markets. Rising benchmark interest rates, expectations of slower global growth and wavering outlook on oil prices have been the key drivers for negative returns, dampening investor demands and widening spreads.

+

+Against a backdrop of choppy global bond yields, slowing global growth, escalating tariff wars and geopolitical tensions, the Indian gilts have had a trying year. Starting with 7.34%-levels in Jan 2018, the 10-yr gilt improved to their annual low of 7.13% in the first week of April.

Post September, the pressure on Indian gilts seems to have eased as the 10-yr gilt rallied to 7.25%-levels. This rally has mainly been driven by a significant cooling in crude prices, back-to-back OMO announcements by RBI, strengthening rupee and rejuvenation in FII inflows.

However, post RBI’s Monetary Policy Committee (MPC) announcement in early April, inadequate Open Market Operations (OMO) announcements by RBI and the currency crises experienced by certain emerging market economies, the yields spiked to a high 8.18% in Sep 2018.

++

28

29 29

2018: QUICKSILVER MARKETS

29

Aggressive OMO Purchases lead to flattening of the curve. Going forward we expect parallel shift depending on the Oil prices and OMO purchases.

Source: Bloomberg

Source: Bloomberg

INR India Sovereign Curve 5/12/2018 (Current)

8.5

8

7.5

7

6.5

3M 6M 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 13Y15Y 17Y 27Y 30Y 40Y

INR India Sovereign Curve 10/31/2018

+

+

At the beginning of 2018, two of our biggest concerns for Indian gilt and bond yields stemmed from the government’s ability to contain fiscal deficit, especially in the run up to general elections in first half of CY2019 and from RBI’s ability to manage inflation.

In the fiscal year till date, the central government maintained its stance and emphasis on fiscal prudence and is expected to adhere to its fiscal deficit targets of 3.3% of GDP (for FY2019).

Crude prices touched a high of US$ 86.09/bbl at the beginning of October 2018 before they cooled down by ~36% to hover around the US$ 55/bbl as on Dec 20, 2018.

+In the current fiscal year FY2019, RBI has announced and/or carried out cumulative OMOs worth INR 2.26 tn (~USD 32.45bn).

Jan/186.60%

6.80%

7.00%

7.20%

7.40%

7.60%

7.80%

8.00%

8.20%

8.40%

Feb/18 Mar/18 Apr/18 May/18 Jun/18 Jul/18 Aug/18 Sep/18 Oct/18 Nov/18 Dec/18

8.18%

7.26%7.23%

7.34%

10-Yr Indian Gilt

+Additionally, in the second half of FY 2019, the government announced a reduction in its gross borrowings by INR 500 bn (~USD 7.18bn).

2018: QUICKSILVER MARKETS

+In November, CPI inflation corrected to a 14 month low of 2.3% with core-CPI at 5.45%, well within RBI’s targeted inflation range of 4% (±2%) for the fiscal year of 2019.

+Domestic investors continued their buying into mutual funds even as FIIs sold. Certain macro-economic indicators are showing a clear, positive trend and suddenly a lot of problems seem to be vanishing – a stable rupee, lower crude prices and RBI’s continued OMOs despite maintaining a hawkish guidance.

+Cooling fuel prices and deflating food prices have contributed to lower inflation numbers. However, these lower numbers are likely to put RBI in a more comfortable position in CY 2019 and make room for possible rate cuts and boost growth.

+Despite the jitters felt due to various credit events that unfolded during 2018 markets seem to be exhibiting resilience.

+This, perhaps, spells positively for 2019.

30

2019: ONCE BITTEN,TWICE NOT SHY

+2018 tested the mettle of most seasoned of the investors -retail or

institutional. But, as we end the year on a positive note, we expect the positivity to last well into 2019.

+At the moment, as 10-yr yields stay steady around 7.25%-levels, the markets are clearly watchful about how the general elections play out, whether the positive trend in credit offtake sustains, systemic liquidity and how all of these shall influence the rates.

Clearly, elections, systemic liquidity, credit assets and interest rates are going to be the quartet to watch out for over the coming quarters.

INDIAN GENERAL ELECTIONS+

The current central government has maintained its emphasis on fiscal prudence and has clearly indicated its intent to remain within the targeted fiscal deficit range of 3.3%.

+However, with the recent state elections hinting at an anti-incumbency wave, it is likely that the various political forces may come up with populist measures as well as expenditure plans.

+This is likely to pressure the deficit situation. However, one needs to note that every act India does on the fiscal front, could have implications on our external ratings front.

31

2019: ONCE BITTEN,TWICE NOT SHYWHEN TWO FIGHT, THE THIRD WINS

LIQUIDITY

One of the major buzzwords in 2018 was the US-China ‘tariff war’. Though the trade war tensions seem to have ebbed considerably in the recent months, they are far from resolved. With US imposing greater tariffs on China, it opens up an opportunity for new suppliers to step into the fray.

India, with its abundant labour and skilled demography has an edge over its counterparts. If India indeed manages internal equation well and plays it right with favourable results in election it could be quite positive for the INR.

+With FII investors returning to the fold and domestic inflows continuing, we expect the RBI to make efforts to ensure that core liquidity goes from deficit zone to neutral zone. We expect RBI to achieve this primarily by doing OMO and if the current account deficit (CAD) appears comfortable then through FX purchases.

+Overall, with inflation appearing to be contained in the comfort zone and with oil prices continuing to remain supportive, RBI is likely to keep markets too in comfort zone.

(250.00)

(500.00)

(1,500.00)

(1,250.00)

(1,000.00)

(750.00)

(500.00)

(250.00)

1-Au

g-18

8-Au

g-18

15-A

ug-1

8

22-A

ug-1

8

29-A

ug-1

8

5-Se

p-18

12-S

ep-1

8

19-S

ep-1

8

26-S

ep-1

8

3-O

ct-1

8

10-O

ct-1

8

17-O

ct-1

8

24-O

ct-1

8

31-O

ct-1

8

1-N

ov-1

8

14-N

ov-1

8

21-N

ov-1

8

21-N

ov-1

8

21-N

ov-1

8

Banking LiquidityTotal Liquidity in

INR bn

(56.24)

Source: Bloomberg

₹

32

+For FY2019-20, we expect headline CPI to remain around RBI’s base case of 4% (± 50bps).

5.70%

2.30%

Source: Bloomberg

2019: ONCE BITTEN,TWICE NOT SHYINFLATION AND INTEREST RATES

+The reduced expectation of rate hikes has erased the rate hike premium which was getting built intothe Indian yield curve. While the government bond yield curve has normalised, there is still a lot ofscope in the corporate bond yield curve to come down.

However, the curve is still steep and we expect some flattening in the yield curve from now untilMarch, due to year-end supply pressures.

With crude and inflation remaining stable, the RBI MPC is unlikely to hike interest rates in the near future, in fact a situation is emerging which may lead to markets discounting rate cuts, instead.

India, today, has one of the highest positive real interest rates and we expect an increase in financial savings which will boost liquidity for the formal lending sector.

+++

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

Sep-

12N

ov-1

2Ja

n-13

Mar

-13

May

-13

Jul-1

3Se

p-13

Nov

-13

Jan-

14M

ar-1

4M

ay-1

4Ja

n-14

Sep-

14N

ov-1

4Ja

n-15

Mar

-15

May

-15

Jal-1

5Se

p-15

Nov

-15

Jan1

6M

ar-1

6M

ay-1

6Ja

l-16

Sep-

16N

ov-1

6Ja

n-17

Mar

-17

May

-17

Jul-1

7Se

p-17

Nov

-17

Jan-

18M

ar-1

8M

ay-1

8Ju

l-18

Sep-

18N

ov-1

8

CPI Core CPI

33

2019: ONCE BITTEN,TWICE NOT SHYCREDIT ASSETS

+The RBI has accelerated the asset purchase (OMO of G-sec) to plug the core liquidity deficit. This has led to a sharp and sudden fall in the G-sec curve resulting in the sharp widening of AAA Corporate bond spread. The spread confirms the magnitude of liquidity shortage and there is a strong need to ease the same. The situation is even more evident in the sub-AAA assets.

+We strongly believe that credit events of 2018 were one-off incidences and spread assets with their risk – reward trade-off offer an attractive investment opportunity. As the liquidity eases, the same will be reflected in the spread of good credits be it AAA or otherwise.

+We expect credit risk funds and duration funds (which are overweight on corporate bonds) to outperform in the medium term.

The illustration in the graph below explains this point. This also indicates the opportunities that lie ahead. For example, the 10 yrs G-sec has to fall atleast 90 basis point (0.90%) and sustain at those levels to generate a ~9.00% CAGR for the next 3 years. Though such returns may be probable the journey will definitely be volatile. Thus credit accrual funds which are enjoying relatively high YTM (yield to maturity) or actively managed duration fund which are overweight in good quality corporate bonds with exposure to duration through G-sec deserve the investors’ dekko in 2019.

The other reasons for the widening spreads are – the market’s reticence with credit assets; and the expectation that RBI may not turn hawkish or hike rates in the near future.

+

AAA- Gilt (5year)

(20dma, bps)

Jan-13

0

20

40

60

80

100

120

Sep-13 Jan-14 Mar-15 Dec-15 Sep-16 Jun-17 Feb-18 Nov-18

Source: Bloomberg

34

This material should not be construed as an offer to sell or the solicitation of an offer to buy units of Kotak Mahindra Mutual Funds. We are not soliciting any action based on this material and is for general information only.Before acting on any statement made or advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice.Investors should read relevant Fund information document and understand the investment objective, risk of such investment before investing. Past performance does not indicate the future performance of the Funds. *All schemes mentioned are open-ended schemes.

DISCLAIMER:

ACTIONABLE INTELLIGENCE: DEBT

Segment Scheme Rationale

Accrual Play

Asset Allocation

Short TermParking of Funds

Investment for higher accrual

Investment for asset allocation

Parking of surpluscash

Higher post taxreturn

Kotak Credit Risk Fund (Erstwhile Kotak Income Opportunities Fund) / Kotak Medium Term Fund

Kotak Savings Fund (Erstwhile Kotak Treasury Advantage Fund) / Kotak Low Duration Fund / Kotak Corporate Bond Fund

Kotak Equity Arbitrage Fund

Kotak Debt Hybrid

Duration Play

Investment forlonger maturities

Investment forshorter maturities

Kotak Bond(Erstwhile Kotak Mahindra Bond Unit Scheme 99)

Kotak Bond Short Term

35

DISCLAIMER

Name of the Scheme

Kotak Equity Arbitrage FundIncome from arbitrage opportunities in the equity marketInvestment in arbitrage opportunities in the cash & derivatives segment of the equity market.

RiskometerThis product is suitable for investors who are seeking*

Riskometer

Low

Moderately

Low

Moderate ModeratelyHigh

High

Investors understand that their principal will be atModerately low risk

Low High

Kotak Infrastructure & Economic Reform Fund (formerly known as “PineBridge Infrastructure & Economic Reform Fund”)

Long term capital growthLong term capital appreciation by investing in equity and equity related instruments of companies contributing to infrastructure and economic development of India

Kotak Bluechip Long term capital growthInvestment in portfolio of predominantly equity & equity related securities

Kotak Small Cap Long term capital growthInvestment in equity & equity related securities predominantly in mid cap stocks

Kotak Equity Opportunities Long term capital growthInvestment in portfolio of predominantly equity & equity related securities

Kotak India EQ Contra Long term capital growthInvestment in portfolio of predominantly equity & equity related securities

Kotak Tax SaverLong term capital growth with a 3 year lock inInvestment in portfolio of predominantly equity & equity related securities

Kotak EmergingEquity Scheme

Long term capital growthInvestment in equity & equity related securities predominantly in mid & small cap companies.

Kotak Standard MulticapLong term capital growthInvestment in portfolio of predominantly equity & equity related securities generally focused on a few selected sectors

Kotak Money Market Scheme Income over a short term investment horizonInvestment in money market securities

Kotak Equity Hybrid FundLong term capital growthInvestment in equity & equity related securities balanced with income generation by investing in debt & money market instruments

Kotak Equity Savings FundIncome from arbitrage opportunities in the equity market & long term capital growthInvestment predominantly in arbitrage opportunities in the cash & derivatives segment of the equity market and equity & equity related securities

Riskometer

Low

Moderately

Low

Moderate ModeratelyHigh

High

Investors understand that their principal will be atModerately High risk

Low High

Riskometer

Low

Moderately

Low

Moderate ModeratelyHigh

High

Investors understand that their principal will be atHigh risk

Low High

Low High

Kotak Savings Fund Income over a short term investment horizonInvestment in debt & money market securities with portfolio Macaulay duration between3 months and 6 months

Kotak Bond Short Term Income over a medium term i horizonInvestment in debt & money market securities with portfolio Macaulay duration between 1 year and 3 years

Kotak Dynamic Bond Income over a medium term investment horizonInvestment in debt & money market securities across duration

Kotak Corporate Bond FundRegular Income over short termIncome by investing in fixed income securities of varying maturities and predominantly in AA+ and above rated corporate bonds

Kotak Credit Risk Income over a medium term investment horizonInvestment predominantly in AA and below rated corporate bonds (Excluding AA+ rated corporate bonds )

Kotak Mahindra Liquid Scheme Income over a short term investment horizonInvestment in debt & money market securities

Kotak Low Duration Regular Income over short termIncome by focusing on low duration securities with portfolio Macaulay duration between 6 months and 12 months

Kotak Bond Income over a long investment horizonInvestment in debt & money market securities with portfolio Macaulay duration between 4 years and 7 years

Kotak Mahindra Gilt Unit Scheme 98 - Investment plan

Income over a long investment horizonInvestments in sovereign securities issued by the Central and/or State Government(s) and / or reverse repos in such securities.

Kotak Medium Term FundIncome over a medium term investment horizonInvestment in debt, government securities & money market instruments with portfolio Macaulay duration between 3 years and 4 years

Kotak Banking and PSU Debt FundIncome over a short to medium term investment horizonInvestment in debt & money market securities of PSUs, Banks, Public Financial Institutions, Government Securities & Municipal Bonds

Riskometer

Low

Moderately

Low

Moderate ModeratelyHigh

High

Investors understand that their principal will be atmoderately low risk

Low High

Riskometer

Low

Moderately

Low

Moderate ModeratelyHigh

High

Investors understand that their principal will be atlow risk

Low High

Riskometer

Low

Moderately

Low

Moderate ModeratelyHigh

High

Investors understand that their principal will be atmoderate risk

Low High

36

Debt Scheme

Equity Scheme

summary

If 2018 was the year of consolidation, 2019 may very well be the year of realistic optimism. Each year is a milestone and a point of pause to mediate on our promises. It is a stopover to revisit our plans, hopes and energies needed to make the best of the opportunity that time has granted us.

We stand at the cusp of history in making and it demands us that we take it with utmost sanctity and regard.

+

2019OUTLOOK