Equity and Debt Outlook

October 2018

EQUITY MARKET

Global equity market snapshot: September 2018

Source: Bloomberg, SBIMF Research

Performance in September 2018 (local currency returns) Performance YTD (local currency returns)

Performance in September 2018 (US$ returns) Performance YTD (US$ returns)

-7 -6-4 -3

-2 -1 -1 -1 -1 0

0 1 1 2 23 4

5 69

-10-8-6-4-202468

10PH

ILIP

PINE

SIN

DIA

NIF

TYSR

I LAN

KAM

SCI I

ndia

PAKI

STAN

GERM

ANY

MSC

I EM

INDO

NES

IATA

IWAN

HAN

G SE

NG

S&P

500

KORE

A UK

FRAN

CEDO

W JO

NES

BRAZ

ILCH

INA

JAPA

NM

SCI E

M -

EURO

PERU

SSIA

% m-o-m (local currency terms)

-15 -15-10 -9 -8 -7 -6 -5 -5

-2

1 3 3 3 4 4 5 6 7 9

-20-15-10

-505

1015

PHIL

IPPI

NES

CHIN

AM

SCI E

MM

SCI E

M -

EURO

PESR

I LAN

KAHA

NG

SEN

GIN

DON

ESIA

GERM

ANY

KORE

A UK

PAKI

STAN

RUSS

IAFR

ANCE

TAIW

ANIN

DIA

NIF

TYBR

AZIL

MSC

I Ind

iaJA

PAN

DOW

JONE

SS&

P 50

0

% YTD (local currency terms)

-9 -8 -8-6

-2 -1 -1 -1 0

0 0 2 2 2 2 3 35 6

9

-12-9-6-30369

12

INDI

A N

IFTY

PHIL

IPPI

NES

SRI L

ANKA

MSC

I Ind

iaPA

KIST

ANIN

DON

ESIA

GERM

ANY

MSC

I EM

HAN

G SE

NG

TAIW

ANS&

P 50

0KO

REA UK

FRAN

CEDO

W JO

NES

CHIN

AJA

PAN

BRAZ

ILM

SCI E

M -

EURO

PERU

SSIA

% m-o-m (US$ returns)

-21 -19-16 -15 -14

-10 -9 -9 -9 -8 -8 -7 -7 -60

1 3 5 7 9

-25-20-15-10

-505

1015

PHIL

IPPI

NES

CHIN

ASR

I LAN

KABR

AZIL

INDO

NES

IAM

SCI E

MM

SCI E

M -

EURO

PEPA

KIST

ANIN

DIA

NIF

TYGE

RMAN

YKO

REA

MSC

I Ind

iaHA

NG

SEN

G UK

FRAN

CETA

IWAN

RUSS

IAJA

PAN

DOW

JONE

SS&

P 50

0

% YTD (US$ returns)

Indian stock market snapshot: September 2018

Source: Bloomberg, SBIMF Research

Performance in September 2018 (local currency returns) Performance YTD (local currency returns)

• Indian equity market delivered negative returns across most of the sectors (barring IT) in September. Real Estate and Telecomwere the worst performers during the month.

• Sensex and Nifty were down by nearly 6% each during the month.

• Both Mid-cap index and small-cap index were down by 13% and 16% respectively. YTD, small and mid-caps have under-performed NIFTY.

• YTD, Nifty is up 4% and Sensex is up 6%. Sector-wise performance has been negative across most of the sectors on a YTDbasis (barring IT, FMCG and Healthcare). Telecom and Real Estate are the laggards (down 39% and 35% respectively).

-20

-16-13 -13 -13 -12 -12

-10 -10 -10 -9 -9-7 -6 -6 -6

-4-1

1

-25

-20

-15

-10

-5

0

5RE

AL E

STAT

E

SMAL

L CA

P

TELE

COM

AUTO

MID

CAP

BAN

KEX

CON

SUM

ER D

URA

BLES

CAP

GO

ODS

FMCG

POW

ER PSU

BSE

500

BSE

100

NIF

TY

SENS

EX

HEAL

THCA

RE

MET

ALS

OIL

& G

AS IT

% m-o-m

-39 -35-25 -22 -20 -19 -17 -16 -11 -11 -9

-4 -3

1 2 4 6 8

39

-50-40-30-20-10

01020304050

TELE

COM

REAL

EST

ATE

SMAL

L CA

PPS

UAU

TOPO

WER

MID

CAP

CON

SUM

ER D

URA

BLES

MET

ALS

CAP

GO

ODS

OIL

& G

ASBS

E 50

0BA

NKE

XBS

E 10

0HE

ALTH

CARE

NIF

TYSE

NSEX

FMCG IT

% YTD

Source: CMIE economic outlook, SBIMF Research,

Q1 FY19 GDP growth accelerated to 8.2%

• Q1 FY19 GDP accelerated to 8.2% vs. 7.7% in 4Q FY18. Higher growth is explained entirely by improvedconsumption demand and lower subtraction of net exports from overall GDP.

• GVA growth rose to 8.0% against 7.6% in previous quarter. Agriculture and Industrial output picked up whileservices moderated, but remained above 7%.

Q1 FY19 GDP growth robust at 8.2% y-o-y and GVA at 8.0% y-o-y

8.8

7.68.0

9.3

5.6

7.7

8.2

4.0

4.55.0

5.5

6.0

6.5

7.07.5

8.08.59.0

9.510.0

Jun-

12

Sep-

12

Dec-

12

Mar

-13

Jun-

13

Sep-

13

Dec-

13

Mar

-14

Jun-

14

Sep-

14

Dec-

14

Mar

-15

Jun-

15

Sep-

15

Dec-

15

Mar

-16

Jun-

16

Sep-

16

Dec-

16

Mar

-17

Jun-

17

Sep-

17

Dec-

17

Mar

-18

Jun-

18

Real GVA at basic prices (%y-o-y)

Real GDP (% y-o-y)

Source: CMIE economic outlook, RBI SBIMF Research; NB: Pink highlighted cells denoted moderation in growth than previous month and Green denotes an improvement in growth than previous month.

Economic activity moderated in AugustWe see some signs of moderation in economic activity in July-August. Mining and electricity generation depicted a weaker growth intheir latest data print. While the overall agriculture outlook remains strong, few of the rural oriented indicators such as 2-wheelersales, tractor sales, fertilizer production showed 1st sign of moderation (perhaps due to high base). On the positive side, barring steelproduction (perhaps due to limited free capacity), most infrastructure indicators are holding strong. Industrial activity picked up in July.Most consumption related indicators continue to hold as well. To sum, the breadth of economic strength is ebbing at the margin. Assuch, we expect Q3 FY19 growth to be lower than Q2’s.

% growth Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 5yr averageIndicators that are Robust

Bank retail loans 17.8 19.1 18.6 17.9 16.7 18.2 16.3Currency in circulation 37.0 32.9 29.8 27.7 25.1 22.7 10.8Domestic air traffic 26.9 25.0 16.1 17.8 21.6 16.9 17.3Domestic capital goods production -3.1 9.8 6.9 9.8 3.0 N/A 2.1Imports of capital goods 26.2 12.4 36.1 26.4 32.1 46.5 3.0Domestic sale of commercial vehicles 24.6 76.0 43.1 41.7 29.7 29.6 7.3Foreign tourist arrivals 13.4 4.4 -3.9 2.7 3.5 9.1 9.5Imports of consumption goods -7.3 -9.9 7.9 1.7 9.9 12.9 10.1Services exports 18.7 36.1 20.4 26.0 33.2 N/A 5.2AUM of mutual funds 21.7 20.7 18.7 20.6 15.5 22.4 23.7Total freight handled 3.3 5.8 5.0 5.7 4.4 6.7 3.6Cement production 13.5 21.9 13.0 13.2 11.1 14.3 5.0Bitumen consumption 10.2 20.3 5.1 23.0 54.1 19.0 8.1

Indicators that have recently turned positiveDomestic industrial production 5.3 4.5 3.9 6.9 6.6 N/A 4.2Merchandise exports -0.4 4.4 20.2 18.0 16.2 19.3 1.8

Indicators that have weakened in recent monthsDomestic sale of two-wheelers 18.3 16.9 9.2 22.3 8.2 2.9 9.3Domestic sale of passenger Cars 0.4 4.9 19.6 34.2 -0.4 -1.0 4.7Fertilizers production 3.2 4.6 8.4 1.0 1.3 -5.3 2.3Mining production 3.1 3.8 5.8 6.6 3.7 N/A 3.0Tractor sales 50.7 21.8 20.1 34.7 16.9 12.7 7.7Electricity production 6.0 2.1 4.1 8.4 6.7 5.4 7.7

Indicators that are weak for longRural wage growth 3.5 3.2 3.2 3.5 N/A N/A 6.1Bank industrial credit 0.7 1.0 1.4 0.9 0.3 1.9 4.1

Source: CMIE Economic Outlook, imd.gov.in, pib.nic.in, cwc.gov.in, SBIMF Research

Agriculture trends are healthy in FY18-19

Live storage in major reservoirs as on 27th September is at 76% of the full reservoir level higher than 65% a year ago

FY19 Kharif sowing likely to be 5.4% higher than last year despite the weakness in rainfall

• South West monsoon in 2018 was below normal (-9.4%below the LPA). Out of 29 states, 19 states witnessedeither deficient or below normal rainfall this season.

• Despite the weak rain, Kharif sowing was higher than lastyear and 1st Advance estimate of Kharif productionindicates likelihood of 5.4% growth in output (whencompared to 1st advance estimate of last year).

• Live storage in major reservoirs as on 27th September is at76% of the full reservoir level vis-à-vis 65% correspondingperiod last year. This portends well for the up-coming Rabiseason as well.

Reservoir level data

- as on Sep 27

No. of reservoirs

Live Storage Capacity

(BCM)

Current Storage (BCM)

Avg of last 10 years (% of live storage

capacity)

Last year(% of

live storage

capacity)

Current (% of live

storage capacity)

Northern Region 6 18 16 83 84 90

Eastern Region 15 19 16 75 75 86

Western Region 27 31 18 68 72 56

Central Region 12 42 34 74 64 81

Southern Region 31 52 38 67 50 74

Total India 91 162 123 72 65 76

South-West Monsoon 2018 witnesses below normal rainfall

Region South-West Monsoon 2018(% departure from normal)

All India -9.4

North-West -2.0

East & North-East -24.3

Central India -6.5

South Peninsular -1.6

Two-wheeler and Tractor sales showing the nascent signs of growth moderation albeit over a high base

Source: CMIE economic outlook, Ministry of Agriculture, SBIMF Research

Rural demand moderated a bit in August but still healthy

FMCG Sales growth grew by 12.6% y-o-y in Q1FY19 vs. 8.9% y-o-y in Q4 FY18

• Few of the rural oriented indicators such as 2-wheeler sales, tractor sales, fertilizer production showed 1st sign of moderation(perhaps due to high base) however, some of the other indicators like FMCG goods, lower end white goods continue to show anincrease in the rural demand in last two-three quarters.

• Looking ahead, fourth consecutive season of higher agricultural output is leading to higher output. Along with this, due to pre-election period, the focus on rural oriented construction activity, access to formal lending channel, better roads, electricity andinternet penetration are leading to the pick-up in rural demand for the related sectors.

• Overall, the agricultural outlook remains strong.

-202468

101214161820

Feb-

10

Jul-1

0

Dec-

10

May

-11

Oct

-11

Mar

-12

Aug-

12

Jan-

13

Jun-

13

Nov

-13

Apr-

14

Sep-

14

Feb-

15

Jul-1

5

Dec-

15

May

-16

Oct

-16

Mar

-17

Aug-

17

Jan-

18

Jun-

18

BSE 500: FMCG Sales growth (in %)

21 companies in BSE 500

Source: RBI, CMIE Economic Outlook, SBIMF Research,

Aggregate commercial credit is picking up

Aggregate commercial credit is picking upBank credit growth is outpacing the deposit growth

Retail lending dominates the bank lending growth Housing loans make the big share in personal loans space

Aug-18 (% y-o-y) Average 3 mths (% y-o-y) % Share

Personal Loans 18 18 100

Housing 17 16 52

Other Personal Loans 29 26 26

Vehicle Loans 13 12 10

Credit Card 37 33 4

Education -1 -1 4

Loan against FD 11 12 3

Consumer Durables -81 -15 1

Loan against Shares, bonds 11 11 0

Source: RBI, FICCI, CMIE economic outlook, SBIMF Research,

Capacity utilization improved to 75.2% by FY18 end

Improved capacity utilization yet to translate into fresh capex decisions

Auto, metals, food processing, and electronics sector show higher capacity utilization

New project announcement is lack-lustreFDI inflows picked up to US$12 billion in Apr-Jul FY19

Source: CMIE economic outlook, SBIMF Research,

Outlook: FY19 growth is expected to improve to 7.5%

Growth is likely to improve further to 7.5% y-o-y in FY19

• FY19 growth is expected to surge to 7.5% y-o-y.

• Looking ahead, higher oil and other commodity prices, widening of trade deficit and monetary tightening pose risks to a robustgrowth outlook, while government infrastructure push, fading away of GST-related disruptions and the seeping in of theproductivity benefits, rising global growth and improved business sentiments will provide the positive support.

5.5

6.4

7.4

8.2

7.1

6.7

7.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

FY13 FY14 FY15 FY16 FY17 FY18 FY19 E

% growth

Source: MOSL, Capitaline, SBIFM Research;

FY19 NIFTY EPS is expected to grow by 19% vs. 6% in FY18

Corporate profit as percentage of GDP is likely to have bottomed out

FY19 earnings outlook

• FY19 demand outlook for consumer oriented companiessuch as FMCG, auto, paints remain buoyed by the pick-upin rural demand. NBFCs too, are holding robust growth.

• Metal and Oil & Gas sectors are being supported by arecovery in global growth and pricing power.

• On the other hand, Bank earnings thus far have continuedto be impacted by the recognition of impaired loans.

• EBITDA margin may remain under pressure for thequarters ahead as rupee slides, the raw material costsescalate and competitive pressures in some of the sectors(such as telecom, aviation, staples and auto) inhibits thecapacity to take the parallel price hikes.

• Earnings have been revised downward. Financial Year-to-Date, we have seen 2-3% downgrade in NIFTY earnings.

• Corporate profit as percentage of GDP has hit anextremely low point and should logically mean revert.

• We expect FY19 earnings to grow by 19% (vs. 6% inFY18) , aided by the growth tailwinds and favorable base.

• Earnings revival are absolutely critical for rich valuations tosustain.

3.0

4.75.4

6.2

7.37.8

5.5

6.5 6.2

4.9 4.6 4.33.8

3.13.5

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

Average of 5.1%

Liquidity: FIIs pulled out while DIIs were net investors in SeptemberFIIs sold US$ 1.49 billion during the month

Source: Bloomberg, SBIMF Research

Mutual funds continue to invest in Indian equities Insurance investors have been volatile in their equity investment trends

-4-3-2-10123456

Jul-1

5Se

p-15

Nov

-15

Jan-

16M

ar-1

6M

ay-1

6Ju

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-

18

Net FII Investment (US$ billion)

-2

-1

0

1

2

3

4

Jul-1

5Se

p-15

Nov

-15

Jan-

16M

ar-1

6M

ay-1

6Ju

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-

18

Net Domestic MF Investment (US$ billion)

-1.5

-1.0

-0.5

0.0

0.5

1.0

Jul-1

5Se

p-15

Nov

-15

Jan-

16M

ar-1

6M

ay-1

6Ju

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-

18

Net Domestic Insurance Investment (US$ billion)

Source: Bloomberg, SBIMF Research,

Indian Equity Valuations relative to emerging markets

India MSCI P/E compared to MSCI EM index is at 56% premium which is a relatively high…

…and the relative return on equity (RoE) has fallen

82 83

103

55

9588

71

64 66

8169

8084

15

40

65

90

115

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

Average of 78% for the period

Valuations have corrected in September

Valuations have corrected across the capitalization curve

Source: Bloomberg, MOSL, SBIMF Research,

Market Cap to GDP rose to eight year high Valuations relative to bond market have also corrected to ~36% premium compared to +50% last month

Sector-wise valuations

Barring IT and Materials, valuations have corrected across the sectors. Industrials and Utilities have gone below their long term average

Source: Capitaline, Bloomberg, NB: *FY19 Earnings are based on Bloomberg Consensus estimate

P/E (based on FY19 earnings*)

Sectors Jan-18 Jul-18 Aug-18 Sep-18 Avg (20 years)

NIFTY Index 19.1 17.8 18.0 16.6 15.6

Consumer Discretionary 21.8 19.3 19.0 16.3 15.0

Consumer Staples 38.4 33.4 35.0 32.0 24.9

Energy 13.7 12.3 12.6 12.5 11.1

Financials 23.1 20.9 20.6 17.9 14.4

Health Care 32.3 25.6 28.1 26.9 23.0

Industrials 25.0 20.4 20.8 18.9 20.2

Information Technology 16.6 18.3 19.4 19.7 17.9

Materials 13.0 11.9 12.3 12.5 12.2

Telecommunication Services 74.5 56.0 52.8 45.0 27.2

Utilities 12.1 10.5 11.2 10.8 12.7

Green implies higher than long-term average

Equity Market outlook

Nifty is trading at ~17 times forward earnings

Source: Bloomberg, SBIMF Research

• Indian equities have seen meaningful correction last month. NIFTY fell6% during the month. YTD, while the index is up 4%, it is only a handfulof stocks which is contributing to the rise.

• Barring IT all sectors delivered negative performance. Performancedown the capitalization curve was worse with mid and small cap down13% and 16% respectively.

• The fall in the market was triggered by the events of credit default inspecific NBFC companies which led investors to extrapolate the risks onall NBFCs with asset-liability mismatch and the effect of NBFCs to thefinancial market in general. Further, the government’s decision to makethe OMCs take a rupee hit on the petrol and diesel prices bore a sniff ofsome reversal in deregulation efforts of the past. It wasn’t perceived anypleasantly either.

• FIIs sold US$ 1.5 billion in the Indian equities though it was equallymatched by the DII investors.

• Amidst macro headwinds (rising import bill, tightening liquidity, rising costof funds and raw materials, fiscal pressure raising the probability ofclamp-down on government capital expenditures) and upcoming politicaluncertainty, we remain cautious and focus on bottom-up stock selection.

• Notwithstanding the current hazy environment, the sharp sell-off has ledvaluations to correct, particularly sharply in the mid-and small capnames. It has created pockets in markets which have turned cheaper forinvestors with a long-term horizon.

810121416182022

May

-05

Jan-

06Se

p-06

May

-07

Jan-

08Se

p-08

May

-09

Jan-

10Se

p-10

May

-11

Jan-

12Se

p-12

May

-13

Jan-

14Se

p-14

May

-15

Jan-

16Se

p-16

May

-17

Jan-

18Se

p-18

NIFTY 12M Fwd PE Ratio

Mean

+1 SD

-1 SD

Fixed Income Market

Global developments weighing on EM Fixed Income

Source: Bloomberg, Various media reports, SBIMF Research

US Actions• Trade conflicts with China• New NAFTA agreement is yet to strike the final chord.• Sanctions on Iran• Sanctions on Russia’s trade of defense and intelligence sectors after Russia’s annexation of Crimea• Sanctions on Turkey: Announced a doubling of tariffs on US imports of Turkish steel and aluminum.

Rising Crude Oil Prices• Brent (US$/bbl.) moved up by 6.1% during the month, as the US sanctions on Iran led to a steep drop in Iranian oil.

EM Specific Developments• Pakistan could seek IMF bailout amid balance-of-payments crisis.• Argentina is under the process of bailout from IMF. The bailout is likely to be $57.4 billion by the end of 2021.• South Africa entered into recession after its economy shrank by 0.8% in Q2 2018• Turkey: US sanctions on doubling of tariffs on Turkish steel and aluminum imports. Along with this, rising inflation,

widening of CAD and a falling currency are stoking fears Turkey is on the verge of financial and economic crisis.• Brazil is witnessing a political and fiscal risk which is acting as a catalyst for weakening of the real.• Russia: Russian ruble is weakening on account of strong dollar, global trade tensions and the risk of new U.S. sanctions

against Moscow bought dollars. However, higher oil prices are providing some support to the ruble.

Political Developments in Eurozone• New fiscal plans raised by Italian government would see government spending rise and put it in conflict with other

Eurozone nations

Global Monetary Tightening• Developed markets are gradually increasing their policy rates.• Gradual Quantitative tightening by Major Central Banks

Developed Market Bond Yields: September 2018

Source: Bloomberg, SBIMF Research

• US bond yields inched up by 20bps in September 2018. YTD the US bond yields has risen by 66bps on account of robustUS GDP data and Fed's rate hike. Fed indicated a possibility of three or more rate hikes in 2019.

• Barring Italy, bond yields for other key developed markets too inched up during the month. Bond yields in Italy fell onreports that Rome plans to cut the budget deficit faster than indicated, easing fears about the fiscal policy.

10 Year Gsec Yield

(% mth end)2016 end 2017 end Jun-18 Jul-18 Aug-18 Sep-18 m-o-m change

(in bps)3m Change

(in bps)% change in YTD (in bps)

Developed market

US 2.44 2.41 2.86 2.96 2.86 3.06 20 20 66

Germany 0.21 0.43 0.30 0.44 0.33 0.47 14 17 4

Italy 1.82 2.02 2.68 2.72 3.24 3.15 -9 47 113

Japan 0.05 0.05 0.04 0.06 0.11 0.13 2 9 8

Spain 1.38 1.57 1.32 1.40 1.47 1.50 3 18 -7

Switzerland -0.19 -0.15 -0.06 -0.01 -0.10 0.04 13 10 19

Emerging market bond yields: September 2018

Source: Bloomberg, SBIMF Research

• Bond yields in Brazil, Indonesia, Russia and Taiwan moderated during the month while, it rose for the other key emergingmarkets.

• YTD, bond yields have risen across all key emerging markets (except China, South Korea and Taiwan).

10 Year Gsec Yield

(% mth end)2016 end 2017 end Jun-18 Jul-18 Aug-18 Sep-18

m-o-m change (in bps)

3m Change (in bps)

% change in YTD (in bps)

Emerging Market

Brazil 11.40 10.26 11.68 11.18 12.20 11.76 -44 8 150

China 3.06 3.90 3.48 3.49 3.60 3.63 3 15 -28

India 6.52 7.33 7.90 7.77 7.95 8.02 7 12 70

Indonesia 7.91 6.29 7.74 7.72 8.16 8.06 -10 32 177

South Korea 2.09 2.47 2.56 2.57 2.31 2.36 4 -20 -11

Malaysia 4.23 3.91 4.20 4.08 4.04 4.07 3 -13 16

Phillippines 4.64 4.93 6.46 6.52 6.38 6.49 10 2 156

Russia 8.36 7.49 7.68 7.70 8.70 8.53 -17 85 105

Taiwan 1.22 0.98 0.98 0.98 0.84 0.83 -1 -15 -15

Thailand 2.65 2.32 2.58 2.71 2.74 2.80 6 22 48

Global policy rate snapshot

Source: Bloomberg, SBIMF Research; NB: * Indonesia had announced to use new policy benchmark i.e. 7-day reverse report rate as its benchmark policy rate in April 2016; Red highlighted cells indicates interest rate hike and green denotes a rate cut.

Global policy rate is on the rise across most key economiesPolicy rate (in %), end period 2014 2015 2016 2017 Mar-18 Jun-18 Sep-18

US 0.25 0.50 0.75 1.50 1.75 2.00 2.25Canada 1.00 0.50 0.50 1.00 1.25 1.25 1.50China 5.60 4.35 4.35 4.35 4.35 4.35 4.35Japan 0.10 0.10 0.10 0.10 0.10 0.10 0.10India 8.00 6.75 6.25 6.00 6.00 6.25 6.50Australia 2.50 2.00 1.50 1.50 1.50 1.50 1.50South Korea 2.00 1.50 1.25 1.50 1.50 1.50 1.50Indonesia 4.75 4.25 4.25 5.25 5.75Taiwan 1.88 1.63 1.38 1.38 1.38 1.38 1.38Thailand 2.00 1.50 1.50 1.50 1.50 1.50 1.50Malaysia 3.25 3.25 3.00 3.00 3.25 3.25 3.25Singapore 0.08 0.08 0.08 0.08 0.08 0.08 0.08Hong Kong 0.50 0.75 1.00 1.75 2.00 2.25 2.50Phillippines 4.00 4.00 3.00 3.00 3.00 5.25 8.25New Zealand 3.50 2.50 1.75 1.75 1.75 1.75 1.75Eurozone 0.05 0.05 0.00 0.00 0.00 0.00 0.00UK 0.50 0.50 0.25 0.50 0.50 0.50 0.75Switzerland -0.25 -0.75 -0.75 -0.75 -0.75 -0.75 -0.75Russia 17.00 11.00 10.00 7.75 7.25 7.25 7.50Turkey 8.25 7.50 8.00 8.00 8.00 17.75 24.00Saudi Arabia 2.00 2.00 2.00 2.00 2.25 2.50 2.75Poland 2.00 1.50 1.50 1.50 1.50 1.50 1.50South Africa 5.75 6.25 7.00 6.75 6.50 6.50 6.50Brazil 11.75 14.25 13.75 7.00 6.50 6.50 6.50Mexico 3.00 3.25 5.75 7.25 7.50 7.75 7.75Argentina 28.00 21.00 26.00 26.75 25.50 37.75 50.00Colombia 4.50 5.75 7.50 4.75 4.50 4.25 4.25Chile 3.00 3.50 3.50 2.50 2.50 2.50 2.50

Tightening Global Liquidity can impact the FII flows in EMs

Source: Bloomberg, IMF, Respective central banks, SBIMF Research

Balance Sheet by Aug 2008 (US$ Bn)

As % of GDP Balance-sheet by Dec 2017 (US$ bn)

As % GDP Change

US Fed 911 6.2 4,449 23.0 3,538 ECB 2,126 15.1 5,368 42.6 3,242 BoE 139 4.8 766 29.9 627 BoJ 1,010 20.0 4,627 94.7 3,617 Total 4,186 11.4 15,210 38.6 11,024

Asset Purchase Programs contributed to US$ 11 billion increase in Central Banks’ balance-sheet between 2008-2017

Balance-sheet by Dec 2017 (US$ bn)

Expected Balance-Sheet by 2018 end 2018 minus 2017

Expected Balance-sheet by 2019 2019 minus 2018

US Fed 4,449 4,028 -421 3,428 -600 ECB 5,368 5,391 23 5,031 -360 BoE 766 779 13 779 - BoJ 4,627 5,080 453 5,265 185 Total 15,210 15,279 68 14,503 -776

Quantitative tightening to begin from 2019

-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Mar

-01

Jan-

02N

ov-0

2Se

p-03

Jul-0

4M

ay-0

5M

ar-0

6Ja

n-07

Nov

-07

Sep-

08Ju

l-09

May

-10

Mar

-11

Jan-

12N

ov-1

2Se

p-13

Jul-1

4M

ay-1

5M

ar-1

6Ja

n-17

Nov

-17

Change in G4 central bank assets Total gross inflows into EM

US$ billion, 4Q rolling sum

QE had aided the FII inflows into Emerging Markets

India Rates Snapshot for September 2018

Source: Bloomberg, PPAC, RBI, SBIMF Research; NB: **Crude oil price is average $/barrel for the month, rest of thedata are % month end; *Corporate bond rate is for AAA rated bonds ,*** Refers to PSU Banks CD rate; # INR and Oil price changes are % change

• Indian bond yields continue to inch higher on account of deprecation in rupee and rise in crude prices.

• Money market rates, too, inched up during the month.

• Crude oil prices increased by 7% during the month. YTD, crude oil prices has risen by 25%.

• Rupee weakened by 2% during the month. YTD (till Sep end), rupee has depreciated by 12%.

Dec-17 Jun-18 Jul-18 Aug-18 Sep-18 m-o-m change (in bps)

Change in YTD (bps)

1 Yr T-Bill 6.40 7.13 7.27 7.33 7.73 41 1333M T-Bill 6.20 6.53 6.79 6.81 7.19 37 9910 year GSec 7.33 7.90 7.77 7.95 8.02 7 703M CD*** 6.38 6.93 7.05 7.08 7.25 18 8812M CD*** 6.75 8.07 8.03 8.08 8.70 63 1953 Yr Corp Bond* 7.66 8.65 8.50 8.59 8.74 15 1085 Yr Corp Bond* 7.68 8.78 8.66 8.74 8.86 12 11810 Yr Corp Bond* 7.90 8.73 8.66 8.75 8.85 10 951 Yr IRS 6.44 6.94 6.91 7.14 7.42 28 985 Yr IRS 6.75 7.33 7.26 7.42 7.67 25 92Overnight MIBOR Rate 6.20 6.25 6.25 6.45 6.60 15 40INR/USD 63.9 68.5 68.5 71.0 72.5 -2# -12#

Crude Oil Indian Basket ** 62.3 73.8 73.5 72.5 77.9 7# 25#

Weighted Average Call money rate 5.99 6.17 6.21 6.36 6.57 15 37

Source: CMIE economic outlook, SBIMF Research,

Robust GDP growth momentum

Q1 FY19 GDP growth robust at 8.2% y-o-y and GVA at 8.0% y-o-y

Inflation has moderated but upside pressures remain

Source: CMIE Economic Outlook, department of agriculture, ppac.org.in, SBIMF Research

While both CPI and WPI moderated in July… …widening of input-output inflation gap poses pass-on risks

Highest Kharif MSP rise in last six years though Rabi hikes were contained…

Rising crude prices coupled with sharp rupee deprecation poses risks to inflation

Central Government Fiscal: Walking a tight-rope

Source: pib.nic.in, CGA, SBIMF Research

• Achieving fiscal deficit target of 3.3% looks difficult as:o GST collections are running behind the targeto Disinvestment + Telecom targets appear tallo Higher MSP for Kharif demands additional costo Recent Rs 1.5 excite cut on petrol & diesel entails

further ~ Rs 10,000 crore of dent on fiscal accounto Large materialization of pending refunds and

limited areas of revenue bonanza elsewhere

• That said, even if centre were to slip by 20bps, it couldfinance it by higher recourse to higher short-termborrowings, small savings or run down of surplus cashbalance.

Monthly run-rate of GST collections lower than requiredApr- Aug FY19 fiscal deficit at 95% of BE similar to the levels seen till August last year

Net tax revenue growth slipped, owing primarily to IGST settlements and higher refunds in corporate taxes

Apr-Aug Cumulative (% y-o-y) Budgeted Growth (in %)

Gross Tax Revenue 8.7 18.3Income Tax 17.5 26.9Corporate Tax 14.3 8.7Custom -33.9 -17.8Excise duties -26.7 0.4

Total Direct 16.1 16.3Total Indirect Tax 4.6 22.2

Actual (as % of BE)- April to July 2011 2012 2013 2014 2015 2016 2017 2018

1 Non-debt Receipts 24 23 23 22 30 27 27 26

a. Tax Revenue (Net) 22 23 21 19 23 27 28 25

b. Non-tax Revenue 35 29 40 40 61 33 24 40

c. Non-Debt Capital Receipts 18 12 9 6 22 13 18 16

2. Expenditure 38 38 40 37 41 41 44 44

a. Revenue Account 38 39 41 38 42 41 46 44

b. Capital Account 33 32 34 34 38 37 35 44

3. Fiscal Deficit 66 66 75 75 66 76 96 95

4. Revenue Deficit 75 79 87 86 75 92 134 104

Banking system liquidity tightening is likely to accentuate further

Source: RBI, SBIMF Research

We expect liquidity to tighten further in 2HFY19 and nearly Rs 2 trillion of OMO purchase in FY19

Bank liquidity tightened rapidly in September after being near neutral until August

Call money rate is anchored to the repo rate

CIC leakage in 2H FY19 likely to be 1.5-2x of 1H FY19

Government raised import duty on 19 items; to have limited impact

Source: CMIE economic outlook, SBIMF Research

Trade deficit has widened as imports rising faster than exports

• To curb the increasing import bill, government raised import duties on 19 items by 2.5%-10% in September. These 19 itemsaccount for nearly 4% of total imports.

• These measures could only provide a marginal correction to import bill. Majority of trade deficit in India is owing to three key items– Oil (48% of trade deficit), gold (18%) and electronic items (27%).

• India is resource starved in crude and gold and hence continue to remain dependent on imports. Imports of electronics is 37 timesits domestic production- implying the sheer lack of domestic capacity. Coal, fertilizers, vegetables oil, chemicals, plastics andpearls & stones makes are other top contributors to trade deficit.

• Most of these items (i.e. barring chemicals & fertilizers) either run limited production capacity or is resource constrained.

• That said, owing to the sharp REER correction YTD and the cumulative impact of import duty hikes, we do expect somemoderation in import growth in pockets where domestic substitution is possible and in segments where imports are price sensitive.

Anatomy of India’s trade deficit

in US$ billion FY17 % Share FY18 %

ShareFY19

(till Aug)%

Share

India's Trade deficit -109 100 -161 100 -81 100

Petroleum Deficit -55 51 -72 45 -39 48

Gold Trade Deficit -22 20 -31 19 -15 18

NONG Trade Deficit -30 28 -54 34 -26 31

o/w Electronic goods -39 36 -48 30 -22 27

Current account deficit widened to 2.4% in Q1 FY19

Source: CMIE economic outlook, CSO, SBIMF Research

• The current account deficit (CAD) for Q1 FY19 stood atUS$ 15.8 billion or 2.4% of GDP vs. 2.0% in Q4 FY18and 2.5% in Q1 FY18.

• The widening of the CAD was primarily on account of arising import bill and unmatched export buoyancy leadingto higher trade deficit. There is some improvement inservices receipts and remittances transferred to Indiawhich partially offsets the worsening merchandise tradefigures.

• Looking ahead, we estimate CAD to increase further tonearly US$ 79 billion (~2.8% of GDP) in FY19.

Current account deficit widen to 2.4% of GDP in Q1 FY19 vs. 2.0% in Q4 FY18

Trade balance worsened sharply offsetting the rise in invisible surpluses

Service Balance and Remittances are holding up

Net FDI inflows picked up while FIIs witnessed net outflows

Source: CMIE economic outlook, RBI, SBIMF Research

• During April-July FY19, Net FDI inflows picked up to US$ 12 billion vs. US$ 11 billion during the same time last year. Whilethe overall FDI momentum looks healthy for FY19, it may not be large enough to fully fund the current account deficit.

• Between FY15 to FY17, FDI inflows were sufficient to fund the CAD. But the dynamics have worsened in FY18 and FY19where net FDI inflows aren’t sufficient to offset the sharper rise in trade deficit. This makes Current Account Deficit heavilyreliant on portfolio flows which has been choppy FYTD. At the same time, we have US$ 10 billion of NRI deposits maturing in2H FY19.

Net FDI inflows are US$ 12 billion FYTD… … but FIIs witnessed net outflows of US$ 11 billion FYTD

BoP to be negative for first time in seven years implying FX fall

Source: CMIE economic outlook, RBI, SBIMF Research

FX reserves have fallen by ~US$23 billion FYTD (till Sep 21)Balance of Payment is likely to be negative in FY19

• BoP surplus in FY18 stood at US$ 44 billion vs. US$ 22 billion in FY17.

• For FY19, we expect both current account deficit to widen and capital account inflow to reduce and consequently Balance ofPayment to turn into a deficit of nearly US$ 25 billion – for the first time in last seven years.

• RBI increased its FX reserves sharply to US$ 424 billion in FY18 vs. US$ 370 billion in FY17. In FY19 (till Sep 21), RBI hasalready sold nearly US$ 23 billion of FX reserves.

Source: CMIE Economic Outlook, Bloomberg, SBIMF Research

Rupee has depreciated against key global currencies

Rupee vs. Yuan: 7.0% depreciation YTD

Rupee vs. British Pound: 8.6% depreciation YTD

Rupee vs. Euro: 8.8% depreciation YTD

Rupee vs. Yen: 11.1% depreciation YTD

Rupee vs. US$: 11.9% depreciation YTD

63.6

72.5

52

57

62

67

72

Mar

-13

Jun-

13Se

p-13

Dec-

13M

ar-1

4Ju

n-14

Sep-

14De

c-14

Mar

-15

Jun-

15Se

p-15

Dec-

15M

ar-1

6Ju

n-16

Sep-

16De

c-16

Mar

-17

Jun-

17Se

p-17

Dec-

17M

ar-1

8Ju

n-18

Sep-

18

Rupees per US dollar

81.4

89.6

94.5

80

85

90

95

100

105

Mar

-13

Jun-

13Se

p-13

Dec-

13M

ar-1

4Ju

n-14

Sep-

14De

c-14

Mar

-15

Jun-

15Se

p-15

Dec-

15M

ar-1

6Ju

n-16

Sep-

16De

c-16

Mar

-17

Jun-

17Se

p-17

Dec-

17M

ar-1

8Ju

n-18

Sep-

18

Rupees per Pound Sterling

69.1

78.8

84.1

65

68

71

74

77

80

83

86

Apr-

13

Sep-

13

Feb-

14

Jul-1

4

Dec-

14

May

-15

Oct

-15

Mar

-16

Aug-

16

Jan-

17

Jun-

17

Nov-

17

Apr-

18

Sep-

18

Rupees per Euro

0.567

0.613

0.639

0.638

0.500.520.540.560.580.600.620.640.660.68

Apr-

13Se

p-13

Feb-

14Ju

l-14

Dec-

14M

ay-1

5

Oct

-15

Mar

-16

Aug-

16Ja

n-17

Jun-

17No

v-17

Apr-

18Se

p-18

Rupees per Yen

9.3

10.5

10.1

10.6

8.58.89.09.39.59.8

10.010.310.510.811.0

Apr-

13

Sep-

13

Feb-

14

Jul-1

4

Dec-

14

May

-15

Oct

-15

Mar

-16

Aug-

16

Jan-

17

Jun-

17

Nov-

17

Apr-

18

Sep-

18

Rupees per Yuan

Rupee has under-performed other emerging market currencies

Source: Bloomberg, SBIMF Research

Dollar strengthened by 5.4% YTD (till Sep) Rupee has been an under-performer in the EM currency Basket YTD 102.2

89.1

95.1

77

82

87

92

97

102

May

-13

Sep-

13

Jan-

14

May

-14

Sep-

14

Jan-

15

May

-15

Sep-

15

Jan-

16

May

-16

Sep-

16

Jan-

17

May

-17

Sep-

17

Jan-

18

May

-18

Sep-

18

DXY Index

• Rupee touched one of its all time low during the month of September. In fact, post the RBI 4th monetary policy statement, rupeerecorded historical low and since then crossed 74 (as on 9 Sep).

• YTD (till Sep end), Indian rupee is one of the under-performer in the emerging market currency basket.

• Higher import bill (mainly on account of oil, gold, electronic items, coal and pearls & stones) and weakness in capital inflows (FIIswitnessed net outflows of US$ 11 billion FYTD) is putting pressure on rupee.

• Government’s five-point action to contain the import bill and shore up the capital flows had limited impact

-37

-18-12 -12 -12

-9 -8 -7.1 -6 -5 -4 -3 -2 -1

1 15

-45

-35

-25

-15

-5

5

Turk

ey Li

ra

Braz

il Re

al

Afric

an R

and

Russ

ian

Roub

le

Indi

an R

upee

Indo

nesia

n Ru

piah

Phili

ppin

e Pe

so

Hung

aria

n Fo

rint

Polis

h Zl

oty

Chin

ese

renm

inbi

Kore

an W

on

Taiw

anes

e Do

llar

Mal

aysia

n Ri

ngitt

Japa

n Ye

n

Colo

mbi

an P

eso

Thai

Bah

t

Mex

ican

Peso

% change YTD (till Sep end)

Rupee near fair value; but near term pressure may continue

Source: BIS, CMIE Economic Outlook, SBIMF Research; NB: if Actual REER is higher than Equilibrium REER, it implies Rupee is over-valued and vice-a-versa.

REER today at 123 is at levels similar to FY11, FY12, FY16 and FY17

REER has corrected for most EM currencies and they look fair to undervalued

• Rupee is trading closer to the longer-term trend and in-factdepicts some bit of under-valuation when adjusted for theproductivity changes.

• That said, the valuations typically tend to work over amedium to long-term. In the near-term, further depreciationpressure on Rupee cannot be ruled out.

When Rebased to FY11=100, Rupee seems fairly valued

80

85

90

95

100

105

110

115

Apr-

10Se

p-10

Feb-

11Ju

l-11

Dec-

11M

ay-1

2O

ct-1

2M

ar-1

3Au

g-13

Jan-

14Ju

n-14

Nov

-14

Apr-

15Se

p-15

Feb-

16Ju

l-16

Dec-

16M

ay-1

7O

ct-1

7M

ar-1

8Au

g-18

Trade weights : 6 currency REER Trade weights : 36 currency

2010-11=100125121

117113

120123

125130

123

90

95

100

105

110

115

120

125

130

135

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Aug-18

Trade weights : 6 currency REER

60708090

100110120130

Turk

ey

Arge

ntin

a

Braz

il

Sout

h Af

rica

Russ

ia

Mex

ico

Indo

nesia

Hung

ary

Mal

aysia

Pola

nd

Colo

mbi

a

Chile

Indi

a

Phili

ppin

es

Thai

land

Taiw

an

Kore

a

Peru

Chin

a

BIS REER Value (as of Aug 2018)

Above 100 is overall valued; Below 100 is undervalued

-40.0 -30.0 -20.0 -10.0 0.0 10.0

Sugar

Coffee

Soybeans

Corn

Cotton

Wheat

% m-o-m

% change in YTD

Commodity: Prices of energy has risen while metals have fallen

Source: Bloomberg, SBIMF Research

Energy prices have risen YTD Prices of precious metals have fallen YTD

Prices of industrial metals have fallen YTD Sugar prices have fallen while wheat prices have risen YTD

0.0 10.0 20.0 30.0 40.0

Natural Gas

Coal

Uranium

Gasoline

Heating Oil

WTI

Gas Oil

Brent

% m-o-m% change in YTD

-30.0 -20.0 -10.0 0.0 10.0

Zinc

Lead

Copper

Aluminium

Tin

Nickel

Iron Ore

% m-o-m

% change in YTD

-20.0 -10.0 0.0 10.0

Silver

Platinum

Gold

Palladium % m-o-m

% change in YTD

Debt Market Valuations

Source: Bloomberg, SBIMF Research

Inflation adjusted returns at 4.3% in India are attractive Differential between 10-year yield and Repo rate is higher than average

G-sec yield relative to equity earnings yield higher than long-term trend

Real rates

10 Year Gsec Yield (% mth

end, Sep end)

CPI Inflation - Aug

Real Rate (in %)

Sovereign Credit Rating

by S&P

Emerging Market Brazil 11.76 4.2 7.6 BB-Russia 8.53 3.1 5.4 BBB-Indonesia 8.06 3.2 4.9 BBB-

India 8.02 3.7 4.3 BBB-Malaysia 4.07 0.2 3.9 A-South Africa 8.72 4.9 3.8 BB

Colombia 6.89 3.1 3.8 BBB-

Mexico 7.94 4.9 3.0 BBB+

China 3.63 2.3 1.3 A+Poland 3.24 2.0 1.2 BBB+Thailand 2.80 1.6 1.2 BBB+South Korea 2.36 1.4 1.0 AA

Hungary 3.54 3.4 0.1 BBB-

Phillippines 6.49 6.4 0.1 BBB

Turkey 17.92 17.9 0.0 BB-

Taiwan 0.83 1.5 -0.7 AA-

5

6

7

8

9

10

11

12

Sep-

05M

ar-0

6Se

p-06

Mar

-07

Sep-

07M

ar-0

8Se

p-08

Mar

-09

Sep-

09M

ar-1

0Se

p-10

Mar

-11

Sep-

11M

ar-1

2Se

p-12

Mar

-13

Sep-

13M

ar-1

4Se

p-14

Mar

-15

Sep-

15M

ar-1

6Se

p-16

Mar

-17

Sep-

17M

ar-1

8Se

p-18

India 10 year Gsec yield (in %) India Earnings Yield (in %)

-150

-50

50

150

250

350

Sep-

01M

ar-0

2Se

p-02

Mar

-03

Sep-

03M

ar-0

4Se

p-04

Mar

-05

Sep-

05M

ar-0

6Se

p-06

Mar

-07

Sep-

07M

ar-0

8Se

p-08

Mar

-09

Sep-

09M

ar-1

0Se

p-10

Mar

-11

Sep-

11M

ar-1

2Se

p-12

Mar

-13

Sep-

13M

ar-1

4Se

p-14

Mar

-15

Sep-

15M

ar-1

6Se

p-16

Mar

-17

Sep-

17M

ar-1

8Se

p-18

India 10 year minus Repo Rate (in bps)

Long Period Average:

Policy Rate Outlook

Source: RBI, SBIFM Research

RBI kept the policy repo rate unchanged at 6.5%

• RBI left the repo rate unchanged to 6.50% but changed the stance fromneutral to ‘calibrated tightening’.

• The current inflation prints have surprised the central bank on thedownside primarily due to softer than usual uptick in summer food prices.RBI has lowered its inflation projection and now expects inflation closer toits desired 4% level as against ~5% expected in the last policy.

• The lower inflation prints in the last two months as well as in the forwardprojections emanates primarily from ultra-low food inflation in India (2.4%FYTD). Fuel and core inflation are worrying with latest prints at 8.5% and5.9% respectively.

• Even as the inflation projection has been marked down, the underlyingtrends continue to be worrying (rising crude, rupee weakness, closingoutput gap and higher pricing power to businesses). Perhaps, it is theseworrying factors which have dictated the change in stance.

• The RBI has been sounding comfortable and confident on domesticgrowth trends, even as it flagged concerns on global growth owing toescalating trade tensions and tightening financial conditions. As such,FY19 growth projection has been retained at 7.4%.

• Even as RBI focuses on inflation in its monetary policy decision, rupee isalso an extremely important variable which cannot be ignored. Indianrupee has depreciated 13% YTD. Continued weakness pressure cancreate financial market risks in India and may warrant monetary tighteningby the central bank. As such, despite the muted headline inflationnumbers, we expect an additional 25bps rate hike by the central bankover next six months in case external account pressure continues.

4.00

5.00

6.00

7.00

8.00

9.00

10.00

Sep-

05M

ar-0

6Se

p-06

Mar

-07

Sep-

07M

ar-0

8Se

p-08

Mar

-09

Sep-

09M

ar-1

0Se

p-10

Mar

-11

Sep-

11M

ar-1

2Se

p-12

Mar

-13

Sep-

13M

ar-1

4Se

p-14

Mar

-15

Sep-

15M

ar-1

6Se

p-16

Mar

-17

Sep-

17M

ar-1

8Se

p-18

Repo Rate (mth end, %)

Debt Market Outlook

Source: Bloomberg, SBIFM Research

Valuations look attractive at G-sec vs. Repo rate

• Having delivered two hikes in successive meetings with a neutral stance, theRBI left the rate unchanged but moved the stance to ‘calibrated tightening’ in itsOctober policy meet.

• Bond markets reacted positively to the pause in rates. Yields corrected acrosstenors, with a larger move at the short end. However, the potential toleration forcurrency weakness has been under- appreciated. It opens up the possibility ofadditional policy tightening in the coming months.

• On the liquidity front, India has had benign liquidity over the last 3 years. All thedrivers have reversed. Credit growth is picking up, demonetization impulse isbehind us and RBI’s intervention to reduce rupee volatility is squeezing liquidity.RBI’s policy tilt is no longer accommodative.

• Recent liquidity squeeze is event-based but system liquidity is likely todeteriorate further led by higher currency withdrawals, cash build-up bygovernment, and continued FX selling given external account pressure. Weexpect ~Rs. 2.0 trillion of OMO purchase in FY19 (Rs. 760 billion committedalready). But even after accounting for the OMO, liquidity deficit is given.

• The reduced borrowing plan by the central government signaling thecommitment to the 3.3% target, a tepid borrowing calendar by the states andRBI’s OMO purchase announcements provided a temporary relief to the G-secyields. While the OMO purchases are expected to provide some comfort to thebond market, elevated crude oil prices, weakening rupee, tight domestic andglobal liquidity and expectations of tighter monetary policy are expected to capthe gains.

• We expect the benchmark 10-year to remain range bound. Investors shouldconsider SIPs in fixed income funds as valuations are attractive and timing themarket may not be easy.

5.75

6.25

6.75

7.25

7.75

8.25

8.75

9.25

Mar

-11

Aug-

11Ja

n-12

Jun-

12N

ov-1

2Ap

r-13

Sep-

13Fe

b-14

Jul-1

4De

c-14

May

-15

Oct

-15

Mar

-16

Aug-

16Ja

n-17

Jun-

17N

ov-1

7Ap

r-18

Sep-

18

10 year GSec yield (mth end, %)

Repo Rate (mth end, %)

Thank you

Disclaimer

This presentation is for information purposes only and is not an offer to sell or a solicitation to buy anymutual fund units/securities. These views alone are not sufficient and should not be used for thedevelopment or implementation of an investment strategy. It should not be construed as investmentadvice to any party. All opinions and estimates included here constitute our view as of this date and aresubject to change without notice. Neither SBI Funds Management Private Limited, nor any personconnected with it, accepts any liability arising from the use of this information. The recipient of thismaterial should rely on their investigations and take their own professional advice.

Mutual Funds investments are subject to market risks, read all scheme related documentscarefully.

Asset Management Company: SBI Funds Management Private Limited (A joint venture with SBI andAMUNDI). Trustee Company: SBI Mutual Fund Trustee Company Private Limited.

Contact Details

SBI Funds Management Private Limited

(A joint venture between SBI and AMUNDI)

Corporate Office:9th Floor, Crescenzo, C-38 & 39, G Block,Bandra Kurla Complex,Bandra (East), Mumbai - 400 051Tel: +91 22 6179 3000Fax: +91 22 6742 5687/88/89/90/91Website: www.sbimf.com

Call: 1800 425 5425

Visit us @ www.youtube.com/user/sbimutualfund

SMS: “SBIMF” to 56161

Email: customer.delight@sbimf.com

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