An open ended equity scheme following business cycles ... · re 2 3 b/13 Mar/13 r/13 3 3 3 g/13 3 t/13 3 3-0 Nifty Pharma & S&P BSE IT Index Nifty Pharma S&P BSE IT Source: MFIE

An open ended equity scheme following business cycles based investing theme

Phases of a Business Cycle

2

The chart is for illustrative purpose only

Ou

tp

ut

Capacity Growth

Trend Growth

Recession

Slump

Recovery

Time

How Business Cycle Actually Works

Ou

tp

ut

Time

Growth

Recession

Slump Recovery

Capacity

Growth

Trend

Macro Economic

conditions and the Fiscal &

Monetary Policy response

by the Govt. & Central Banks,

during an on-going Business

Cycle may extend or shorten a

Business Cycle basis

conditions prevailing at the

time. Such distortions often

provides appropriate

opportunities to invest

3 The chart is for illustrative purpose only

Characteristics of Business Cycle Phases

GROWTH RECESSION SLUMP RECOVERY

Economic Conditions

• Capacity utilisation above

normal

• Output growth strong

• Corporate profitability also

peaks.

• Strong tax revenues

• Markets not focussing on risk

Appropriate Monetary

Policy Response:

Tightening/ Contractionary

Economic Conditions

• Capacity utilisation still

above normal but falling

• Output growth below trend

• Tax revenues moderating


Policy Response:

Moving from contractionary

to neutral

Economic Conditions

• Capacity utilization below

normal.

• Growth also below trend.

• Risk aversion very high.

• Demand weak


Policy Response:

Accommodative policy

Economic Conditions

• Growth – Picks Up

• Credit Growth – Improves

• Inflation – starts to increase

• Govt. tax collection –

starts picking up


Policy Response:

Move from accommodative to

neutral

4 The above list is illustrative and not exhaustive, there may be several other characteristics observed during each phase

How To Identify A Business Cycle? – Few Examples

Business Cycle in Growth Phase Business Cycle in Slump Phase

Consumers and businesses feel

confident

Factories run at full capacity across all shifts

Businesses plan expansion

Employees have multiple job offers, Salary

hikes

Consumers buy discretionary goods, plan

vacations (growth in tourism)

Consumers and businesses nervous.

Postponing spending

Factories have idle capacity. Not operating

all shifts

Businesses cutting cost and capex

Layoffs and Salary Freeze

Consumers opt for spending cut

5 The above list is illustrative and not exhaustive. Capex – Capital Expenditure. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not

have any future position in these stocks/sectors.

Impact of

BUSINESS CYCLES

on Sectors

6

Sector Impact – Business Cycle

Sector Performance across Business Cycle phases

SECTORS RECOVERY EXPANSION RECESSION SLUMP

Financials

Technology

Consumer Discretionary

Consumer Staples

Pharmaceuticals

Energy

Real Estate

Metals

Utilities

7

Green shade indicates good performance, Amber shade indicates neutral performance and Red shade indicates poor performance. The stocks/sectors mentioned in this slide do not constitute any recommendation and

ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors


SLUMP

ILLUSTRATION 1 – CEMENT INDUSTRY (CYCLICAL SECTOR)

Particulars Remarks

Cement bag capacity

(Daily) 100 units

Actual Demand (Daily) 40 units

Revenue (Daily) 40*100 =

Rs. 4,000

Fixed Cost (Daily) Rs. 1,000

Net Profit Rs. 3,000

GROWTH

Particulars Remarks

Cement bag capacity

(Daily) 100 units

Actual Demand (Daily) 90 units

Revenue (Daily) 90*100 =

Rs. 9,000

Fixed Cost (Daily) Rs. 1,000

Net Profit Rs. 8,000

• Capacity of Producing:

100 Cement Bags Daily

• Sales Value of Cement

Bag – INR 100

8

The above table is for illustrative purpose only. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these

stocks/sectors


RECOVERY / GROWTH PHASE

ILLUSTRATION 2 – BANKING (CYCLICAL SECTOR)

• Increased Capex by

companies

• Increased requirement for

raw materials, resources

etc. by companies

• Rise in income,

discretionary spending by

individuals, corporates

Pick up in Sentiments,

Demands, Credit. Banks

tend to do well

Strong GDP growth rate

High inflation

Rising interest rates

9 Capex – Capital Expenditure. The above explanation is for illustrative purpose only. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have

any future position in these stocks/sectors


WHEN THE GOING GETS TOUGH (SLUMP)

ILLUSTRATION 3 – PHARMA & FMCG (DEFENSIVE SECTOR)

Hey, despite this pandemic I still need…

Medicines

Food to

survive

Medicines Food

10 The above explanation is for illustrative purpose only. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors

Defensive sectors like Pharma

& FMCG tend to do well even

when economy is in slump

BUSINESS CYCLE

Investing

11

Business Cycle Investing – Akin To Driving

CONDITIONS WHEN DRIVING ON EXPRESSWAY

Broad & Smooth roads

Comfortable Journey

Less Travel Time

Efficient fuel consumption

CONDUCIVE FOR SPEED @ 80-100 KMPH

• Banks

• Infrastructure

• Real Estate

• Capitall Goods

CONDITIONS WHEN ECONOMY IS IN FULL SWING

Good Macros

Low interest rate environment

Good Demand

CONDUCIVE FOR INVESTMENT PORTFOLIO

TO ALIGN TOWARDS

12

The above explanation is for illustrative purpose only. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these

stocks/sectors. The asset allocation and investment strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the

Scheme.


CONDITIONS WHEN DRIVING ON A CITY HIGHWAY

Average roads

Less Comfortable Journey

More travel time due to traffic

Inefficient fuel consumption


• Energy

• Metals

• Technology

CONDITIONS WHEN ECONOMY IS

IN MODERATE ZONE

Average Macros

Relatively high interest rate environment

Average Demand


TO ALIGN TOWARDS

13



Scheme.


CONDITIONS WHEN DRIVING IN A VILLAGE

Narrow roads

Uncomfortable Journey

More Travel Time

High fuel consumption


• Technology

• Pharmaceuticals

• Power

• Telecom

CONDITIONS WHEN ECONOMY IS

IN A RECESSIONARY ZONE

Poor Macros

Poor Growth prospects

Low Demand


TO ALIGN TOWARDS

14



Scheme.

How is

BUSINESS CYCLE

INVESTING different?

15

P/E – Price to Earnings, P/B – Price to Book

Windshield Mirror Vs. Rear View Mirror

WINDSHIELD MIRROR REAR VIEW MIRROR

Future earnings potential

AIMS TO FOCUS ON WAY FORWARD

Economic indicators Future market share growth

Future project pipeline Historical returns

AIMS TO FOCUS ON HISTORICAL DATA

Long term average PE + PB Track record of dividend yield

Category Flows

16

BOTTOM-UP APPROACH ORIENTED FUND BUSINESS CYCLE ORIENTED FUND

(TOP-DOWN APPROACH)

BUSINESS CYCLE INVESTING – An Investment Style

Which Focuses on Macros

WAY FORWARD

• Economic indicators

• Future earnings potential

• Future market share

growth

• Future project pipeline

HISTORICAL DATA

• Long term average

PE + PB

• Historical returns

• Track record of

dividend yield

• Flows to that category

WAY FORWARD

• Economic indicators

• Policy response

• Growth

• Inflation

HISTORICAL DATA

17

Heavy

Light

Heavy

Light

• Management

track record

• Valuations

(P/E & P/B)

P/E – Price to Earnings, P/B – Price to Book

Weightage Weightage

Historical Turning Points in

BUSINESS CYCLE

18

Strong recovery in Domestic + Global Growth = Strong Recovery Phase

2003-2004: Turning Point

CONTRIBUTING FACTORS TO

DOMESTIC GROWTH

• Low Interest Rates, 10 year G-sec at 5%,

Current Account Surplus @ 2.3%, Low

Inflation ~ 3.5%, Currency valuations cheap

• Low Household & Corporate leverage

• Bank NPAs and resolution

• Cheap land and labor

Banking & Capital Goods performed well post 2003,

as the leveraging cycle, capex and infrastructure picked-up

19

408

100

846

0

200

400

600

800

Dec/0

3

Dec/0

4

Dec/0

5

Dec/0

6

Dec/0

7

Index

Valu

es R

e-based t

o 1

00

S&P BSE Bankex & Capital Goods

S&P BSE Bankex S&P BSE CG

Source: MFIE. NPA – Non Performing Assets. Time period for performance considered is from 31-Dec-03 to 31-Dec-07. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual

Fund may or may not have any future position in these stocks/sectors. Past performance may or may not sustain in future. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit

http://www.icraonline.com/legal/standard-disclaimer.html.

http://www.icraonline.com/legal/standard-disclaimer.htmlhttp://www.icraonline.com/legal/standard-disclaimer.htmlhttp://www.icraonline.com/legal/standard-disclaimer.html

Slow Domestic Growth + Weak Global Growth = Slowdown/Recession Phase

2011-2012: Turning Point


DOMESTIC GROWTH

• Weaker macro environment – Pro cyclically

High fiscal deficit, High Inflation, High Current

Account Deficit

• Expensive Currency

• High corporate leverage, neutral household

leverage

Pharmaceuticals & Technology performed well post 2012,

as INR depreciated & Current Account Deficit was high

20

127

100

160

90

110

130

150

170

Dec/1

2

Jan

/1

3

Feb/13

Mar/13

Apr/13

May/1

3

Jun

/1

3

Jul/

13

Au

g/13

Sep/1

3

Oct/13

Nov/13

Dec/1

3

Index

Valu

es are r

e-based t

o 1

00

Nifty Pharma & S&P BSE IT Index

Nifty Pharma S&P BSE IT

Source: MFIE. Time period for performance considered is from 31-Dec-12 to 31-Dec-13. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any

future position in these stocks/sectors. Past performance may or may not sustain in future. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit http://www.icraonline.com/legal/standard-

disclaimer.html.


Weak Domestic Growth + Strong Global Growth = Global Recovery / Domestic Slowdown Phase

2018: Turning Point


DOMESTIC GROWTH

• Demonetization – a massive regulatory

tightening, however weaker policy response

to counter it including tight monetary

conditions

• Pro-cyclical regulatory environment – NBFCs

loan book expansion driving household

leverage in a weak income environment

• Low corporate leverage but low earnings

Pharmaceuticals & Technology performed well post

2018, due to strong Global Cycle

21

133

154

70

90

110

130

150

Dec/1

8

Mar/19

May/1

9

Au

g/19

Oct/19

Jan

/2

0

Mar/20

Jun

/2

0

Au

g/20

Nov/20

Index

Valu

es are r

e-based t

o 1

00

Nifty Pharma & S&P BSE IT Index

Nifty Pharma S&P BSE IT

Source: MFIE, NBFC – Non Banking Financial Company. Time period for performance considered is from 31-Dec-18 to 30-Nov-20. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential

Mutual Fund may or may not have any future position in these stocks/sectors. Past performance may or may not sustain in future. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit

http://www.icraonline.com/legal/standard-disclaimer.html.


Why BUSINESS CYCLE

investing at this juncture –

Macroeconomic Factors are

going to be critical

22

Shift From High To Low Interest Rates

Over the last decade, Global Central Banks including India & US, have supported growth by maintaining a

low interest rate environment

Any change in the interest rate stance may trigger Business Cycle Phase change

23

8.0

4.0

3.5

4.5

5.5

6.5

7.5

8.5

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

India Repo Rate (%)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

US 3Y, 5Y, 10Y Treasury Yields (%)

USGG3YR Index USGG5YR Index USGG12M Index

Source: RBI, Edelweiss Research. Data as of Nov 30, 2020

Shift In The Amount Of Fiscal Stimulus

Global Economies have expanded their balance sheets manifold in the last decade

thereby increasing liquidity.

Any change in the stance on quantum or a decline in stimulus may trigger Business Cycle phase change

24

15236

27405

15000

19000

23000

27000

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

US Treasury Public Debt Outstanding (USD Bn)

8.5

15.1

4.0

6.0

8.0

10.0

12.0

14.0

16.0

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

Global broad money supply growth

(US, Europe & China)

Source: Edelweiss Research. Data as of Nov 30, 2020

Shift In Volatility

Equity markets delivered decent returns in relatively less volatile period due to ample liquidity.

With limited room for rate cuts and fiscal stimulus going forward, Business Cycle Phase

may change with reversal in stance

25

-60%

-30%

0%

30%

60%

90%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

2000-2009 Equity Market Returns

(Nifty 50 Index)

Avg. Returns:

21%

-30%

-10%

10%

30%

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

2010-2019 Equity Market Returns

(Nifty 50 Index)

Avg.

Returns:

10%

Source: MFIE. Past performance may or may not sustain in future. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit http://www.icraonline.com/legal/standard-disclaimer.html.


Shift In Number of COVID Cases – Peak To Trough

Except for the US, COVID-19 Infection curve appears to be flattening. Vaccines have already been approved and

are being used in some countries. Business Cycle may change going forward with mass availability of COVID

vaccine & on-going development around COVID vaccine

26

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

200000

0

10000

20000

30000

40000

50000

60000

Day 1

Day 8

Day 1

5

Day 2

2

Day 2

9

Day 3

6

Day 4

3

Day 5

0

Day 5

7

Day 6

4

Day 7

1

Day 7

8

Day 8

5

Day 9

2

Day 9

9

Day 1

06

Day 1

13

Day 1

20

Day 1

27

Day 1

34

Day 1

41

Day 1

48

Day 1

55

Day 1

62

Day 1

69

Day 1

76

Day 1

83

Day 1

90

Day 1

97

Day 2

04

Day 2

11

Day 2

18

Day 2

25

Day 2

32

Day 2

39

Day 2

46

Day 2

53

Day 2

60

Day 2

67

Day 2

74

Day 2

81

Day 2

88

Day 2

95

Day 3

02

Day 3

09

Italy France Spain Iran Russia UK US - RHS India - RHS Brazil - RHS

Source: JM Financial. Data as of Nov 30, 2020

To Sum Up…

LAST DECADE

Scenario

Easy Monetary Policy + Interest Rate Cuts

=

led to Lower Volatility

NEXT DECADE

Scenario

Limited room for rate cut + Elevated Global equity valuations

=

May result in Volatility

Strategy

Positive for equities as an asset class and

long duration schemes

Strategy

1) Be nimble as the macro environment may change

2) Schemes which aim to move between sectors swiftly

3) Volatility may be high. Hence a portfolio capable of prudently

positioning between various sectors may be suitable

27

PRESENTING

ICICI Prudential

BUSINESS CYCLE FUND

28

Business Cycle Investing O

utput

Time

Invests across Marketcap

No capping / minimum requirements

Invests across Themes

No capping / limits towards a particular theme

Invests across Sectors

No capping / limits towards a particular sector

Top Down Approach of investing

Not a Value / Contra / Special Situation/

Growth style of investment

02

03

04

29

01

The asset allocation and investment strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.

About ICICI Prudential Business Cycle Fund

INVESTMENT

PHILOSOPHY

Aim to identify and invest in opportunities

across sectors/themes/market caps, based

on prevailing business cycle

INVESTMENT

PROCESS

• The Fund Manager & Analysts decide the

investment theme basis prevailing market cycle

• The Fund Management team identifies

opportunities in that particular sector

INVESTMENT

APPROACH

Pure top-down approach based on various

macro indicators – inflation, growth, deficit, etc.

INVESTMENT

UNIVERSE

Opportunities from Nifty 500 TRI universe

will be considered for investment

SECURITY

SELECTION

Post identifying sectors based on the

Business Cycle, aim to select stocks basis

various financial parameters

EVALUATION

Periodic/event based assessment of the

macro economic environment and subsequent

investment approach

30 The asset allocation and investment strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.

Robust Investment Process & Portfolio Construct

ICICI PRUDENTIAL

BUSINESS CYCLE FUND

Monitor macro indicators –

GLOBAL & DOMESTIC

Aims to identify Business

Cycle –

GLOBAL & DOMESTIC

Aims to identify suitable

Theme / Sectors

Meeting of the Fund

Managers & Analysts

Finalize

Theme/Sectors/Stocks

Aims to identify

stocks

31 The asset allocation and investment strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.

Below parameters are aimed at ascertaining the phase of Business Cycle

and subsequently an investment approach is devised

Parameters For Identifying Business Cycles

Capex – Capital Expenditure, DM – Developed Markets. The above list its not exhaustive and above mentioned indicative indicators are used to ascertain business cycle and the same may change based on the evolving environment. The

asset allocation and investment strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.

32

MACRO

PARAMETERS

• Current Account Deficit

• Interest Rates

• Fiscal Deficit

• Inflation

• Capex Investments • New Projects cleared, etc

• Purchasing Manager Index • Business Confidence Index

• Sales of various consumer discretionary products, etc.

• DM Growth Outlook

• DM Policy Outlook

• China Growth Outlook

• China Policy Stance

INVESTMENT

INDICATORS

BUSINESS &

CONSUMER

SENTIMENT

GLOBAL

FACTORS

• IIP Growth

• Credit Growth

Investment Approach – Themes

The investment approach

is then determined by

classifying investment

themes basis Global &

Domestic Growth and

Business Cycle

33

Glo

bal

Grow

th

Domestic Growth

Global Growth: Strong

Domestic Growth: Strong

Global Growth: Strong

Domestic Growth: Weak

Global Growth: Weak

Domestic Growth: Weak

Global Growth: Weak

Domestic Growth: Strong

BLUE SKY PIGGY BACKING

DARK CLOUD RIDER

BLUE SKY – STRONG GLOBAL GROWTH + STRONG DOMESTIC GROWTH

Investment Portfolio

GLOBAL

CYCLICALS

SECTORS TO LOOK OUT FOR

• Metals • Mining • Oil, etc.

GLOBAL CYCLICALS (Sectors to look out for)

DOMESTIC

CYCLICALS


• Consumer Durables

• Capital Goods

• Banking • Auto

• Infrastructure

DOMESTIC CYCLICALS (Sectors to look out for)

34

The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors. The asset allocation and investment strategy will be

as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.

DARK CLOUD –

WEAK GLOBAL GROWTH + WEAK DOMESTIC GROWTH

RIDER –

WEAK GLOBAL GROWTH + STRONG DOMESTIC GROWTH


DOMESTIC DEFENSIVES (Sectors to look out for)

DOMESTIC

DEFENSIVES


DOMESTIC

CYCLICALS


• Consumer Durables

• Capital Goods

• Banking • Auto

• Infrastructure

• Telecom

• Utilities

• Power

• FMCG, etc.

DOMESTIC CYCLICALS (Sectors to look out for)

35




The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors. The asset allocation and investment

strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.

36


GLOBAL CYCLICALS

(Sectors to look out for)

• Metals

• Mining

• Oil, etc.

EXPORT

ORIENTED


EXPORT ORIENTED


• IT

• Pharmaceuticals

• Auto Ancillaries, etc.


DEFENSIVES


• Telecom

• FMCG

• Utilities, etc.

PIGGY BACKING – STRONG GLOBAL GROWTH + WEAK DOMESTIC GROWTH

DOMESTIC

DEFENSIVES GLOBAL

CYCLICALS

Alpha Generation Strategy

The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors. The asset allocation and investment

strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.

Dec/03

May/06

Oct/08

Mar/11

Aug/13

Jan/16

Ju

n/18

(2003-2004)

Global Outlook: Growth

Domestic Outlook: Recovery

Sectors that performed:

Banks & Capital Goods

(2008-2009)

Global Outlook:

Weak Growth

Domestic Outlook:

Strong Recovery

Sectors that

performed:

Banks & Auto

(2011-2012)

Global Outlook:

Weak Growth

Domestic Outlook:

Slowdown

Sectors that

performed:

Tech, Pharma, FMCG

(2013-2014)

Global Outlook: Neutral

Domestic Outlook: Recovery

Sectors that performed:

Banks & Auto

(2018-2020)

Global Outlook:

Strong Growth

Domestic

Outlook:

Recession

Sectors that

performed:

Tech, Pharma,

FMCG

BLUE SKY RIDER DARK

CLOUD

RIDER PIGGY

BACKING

Sep/20

37

Current Domestic

Macro Scenario

38

Repo Rates in India are at significantly low levels. Low capacity utilization numbers indicate that India has

excess capacity if demand picks up pace

Abundant Liquidity & Excess Capacity

39

8.0

4.0

3.5

4.5

5.5

6.5

7.5

8.5

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

India Repo Rate (%)

79.0

63.7

60.0

65.0

70.0

75.0

80.0

20

11

20

12

20

12

20

13

20

13

20

14

20

14

20

15

20

15

20

16

20

16

20

17

20

17

20

18

20

18

20

19

20

19

20

20

Capacity Utilization (%, 4QMA)

Source: Edelweiss Research, RBI. Data as of June 30, 2020.

Percentage of Cases Testing

Positive Have Dropped

Recovery Rate Has Improved Coupled with

Declining Death Rate

Subsiding COVID Cases

40

0%

2%

4%

6%

8%

10%

0

20

40

60

80

100

120

140

160

6-M

ar

13-A

pr

21-M

ay

28-J

un

5-A

ug

12-S

ep

20-O

ct

27-N

ov

% t

ested p

osit

ive

Cases in

Million

s

Cumulatived Tested % tested positive (RS)

-0.5%

0.5%

1.5%

2.5%

3.5%

4%

24%

44%

64%

84%

6-M

ar

13-A

pr

21-M

ay

28-J

un

5-A

ug

12-S

ep

20-O

ct

27-N

ov

Death

Rate

Reco

very R

ate

Recovery rate (recovered to gross cases)

Death rate (Deaths to gross cases) - RS

Source: Morgan Stanley Research. Data as of Nov 27, 2020. RS- Right Side denotes what Y axis stands for in the graph

Improving GDP Growth Rate Correction in Real Estate Prices

Economic Growth & Real Estate

41

7.0% 6.6% 5.8%

5.0% 4.5% 4.7% 3.1%

-23.9%

-7.5%

-30.0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

Q2 F

Y19

Q3 F

Y19

Q4 F

Y19

Q1 F

Y20

Q2 F

Y20

Q3 F

Y20

Q4 F

Y20

Q1 F

Y21

Q2 F

Y21

India GDP Data

2,618

2,292

1000

1500

2000

2500

Dec/17

May/1

8

Oct/18

Mar/19

Au

g/1

9

Jan

/20

Jun/2

0

Nov/20

S&P BSE Realty Index

Source: MFIE, NSO. Past performance may or may not sustain in future. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit http://www.icraonline.com/legal/standard-

disclaimer.html.


Current Macro Economic Scenario

• Significant Monetary and Fiscal Stimulus has been delivered by Global economies in CY2020 in the

wake of COVID-19 crisis

• This was primarily to deal with growth slowdown resulting from COVID-19 led lockdowns

• Monetary Policy support from Global Central Banks is expected to continue

• With significant global liquidity, India among other emerging markets is expected to do well

• Indian Economy seems to be getting back on track with improvement in growth, better than anticipated

Q2FY21 results, earnings upgrades and subsiding COVID cases

• Since Domestic growth is expected to improve further given good liquidity and global growth is

expected to be neutral due to increase in second wave of COVID infections in select developed

economies and subdued earnings, we believe we are in the „Rider‟ Phase

• Hence, we believe, investment in Domestic Cyclicals like Corporate Banks, Capital Goods, Metals &

Infrastructure and Real Estate is expected to do well

42 The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors

Investment Portfolio – Current Business Cycle

Rider – Neutral Global Growth + Recovery in Domestic Growth

DOMESTIC

CYCLICALS


43

Metals are considered as Global Cyclicals. he stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors. The asset

allocation and investment strategy will be as per Scheme Information Document. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the Scheme.

METALS BANKING CAPITAL GOODS INFRASTRUCTURE

Our Experience In Macro Calls

YEAR CALL RATIONALE OUTCOME

2012-13 Invest in Global Funds Inflation and Current Account Deficit at

alarming levels

Launched ICICI Prudential US Bluechip Equity Fund and

gave a strong buy call on Exports and Services sector.

S&P 500 delivered 20% CAGR from Dec-12 to Dec-14

2013-14 Invest in Infrastructure,

Banking, Small & Midcap Funds

Strong Govt. Mandate, expectations of NPA

resolution, expectation of fall in interest rates

Launched ICICI Prudential Value Fund - Series. S&P

BSE Midcap TRI & S&P BSE Smallcap TRI delivered

31% & 36% CAGR respectively from Dec-13 to Dec-15

2017 Invest in Technology Fund Expensive currency, global growth expected

to be better than domestic growth

S&P BSE IT TRI delivered 36% absolute returns from

Nov-17 to Nov-18

2018 Invest in Gold

NBFC loan book expansion in weak income

environment, low earnings growth & market

volatility

Gold delivered 10% absolute returns from Jan-18 to

Jan-19

2020 Aggressively invest in G-Sec Slowdown in growth and inflation. RBI

interventions increase in the wake of COVID-19

Crisil Dynamic Gilt Index delivered 3% absolute returns

from May 1, 2020 to July 17, 2020

44

ETF – Exchange Traded Funds. Source – MFIE. The stocks/sectors mentioned in this slide do not constitute any recommendation and ICICI Prudential Mutual Fund may or may not have any future position in these stocks/sectors. Past

performance may or may not sustain in future. MFI Explorer is a tool provided by ICRA Online Ltd. For their standard disclaimer please visit http://www.icraonline.com/legal/standard-disclaimer.html.


Key Takeaways About The Scheme

45

Pure Top Down Approach

Macro based fund

Not a Value/Contra/Special Situation etc.

Opportunistic and Nimble in terms of sector allocation

No cap on market cap/sector/themes

Hassle free approach – No stress of changing themes basis Business Cycle

Long Term Approach



Portfolio Features

46

Type of Scheme An open ended equity scheme following business cycles based investing theme

Plans

ICICI Prudential Business Cycle Fund &

ICICI Prudential Business Cycle Fund – Direct

Options Growth & Dividend

Minimum Application Amount Rs. 5,000 (plus in multiples of Re.1)

Minimum Additional Application Amount Rs. 1,000 (plus in multiples of Re.1)

Minimum Redemption Amount Any amount

Entry Load Not applicable

Exit Load

Upto 12 Months 1% of applicable NAV

More than 12 Months Nil

Fund Manager Anish Tawakley, Ihab Dalwai & Manish Banthia (involved in identifying business cycles)

Benchmark Index Nifty 500 TRI

SIP / SWP / STP Available

In addition to the fund managers managing this fund, overseas investment will be managed by Ms. Priyanka Khandelwal

Riskometers

47

ICICI Prudential US Bluechip Equity Fund (an open ended equity scheme investing predominantly in securities of large cap companies listed in the

United States of America) is suitable for investors who are seeking*:

Long term wealth creation An open ended equity scheme primarily investing in equity and equity related securities of companies listed on recognized stock

exchanges in the United States of America

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them

Riskometer & Disclaimer

ICICI Prudential Business Cycle Fund (An open ended equity scheme following business

cycles based investing theme) is suitable for investors who are seeking*:

Long Term wealth creation

An equity scheme that invests in Indian markets with focus on riding business cycles through dynamic

allocation between various sectors and stocks at different stages of business cycles

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.

All figures and other data given in this document are dated. The same may or may not be relevant at a future date. The AMC takes no responsibility of updating any data/information in this material from time to time. The

information shall not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Prudential Asset

Management Company Limited. Prospective investors are advised to consult their own legal, tax and financial advisors to determine possible tax, legal and other financial implication or consequence of subscribing to

the units of ICICI Prudential Mutual Fund. Data source: Bloomberg, except as mentioned specifically.

Disclaimer: In the preparation of the material contained in this document, ICICI Prudential Asset Management Company Ltd. (the AMC) has used information that is publicly available, including information developed in-

house. Some of the material used in the document may have been obtained from members/persons other than the AMC and/or its affiliates and which may have been made available to the AMC and/or to its affiliates.

Information gathered and material used in this document is believed to be from reliable sources. The AMC however does not warrant the accuracy, reasonableness and / or completeness of any information. We have

included statements / opinions / recommendations in this document, which contain words, or phrases such as “will”, “expect”, “should”, “believe” and similar expressions or variations of such expressions, that are

“forward looking statements”. Actual results may differ materially from those suggested by the forward looking statements due to risk or uncertainties associated with our expectations with respect to, but not limited to,

exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on our services and / or investments, the monetary and interest policies of India, inflation,

deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices etc. ICICI Prudential Asset Management Company Limited (including its affiliates), the Mutual Fund, The

Trust and any of its officers, directors, personnel and employees, shall not liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss

of profit in any way arising from the use of this material in any manner. Further, the information contained herein should not be construed as forecast or promise. The recipient alone shall be fully responsible/are liable for

any decision taken on this material.

48

The Greatest Lessons Regarding Cycles Are Learned Through

Experience…as In The Adage “Experience Is What You Got

When You Didn‟t Get What You Wanted”

Howard Marks

(Mastering the Market Cycle)

THANK YOU

49

Documents

An open ended equity scheme following business cycles ... · re 2 3 b/13 Mar/13 r/13 3 3 3 g/13 3 t/13 3 3-0 Nifty Pharma & S&P BSE IT Index Nifty Pharma S&P BSE IT Source: MFIE