Monthly Fixed Income Update - November 2018

Nov 30, 2018

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Consumer Price Index (CPI) inflation once again surprised positively with October reading coming at 3.1% against market expectations and RBI’s long term target of 4%. The benign inflation is driven by low food inflation and some softness on core inflation as well.
The Indian Rupee weakened in the earlier part of the month, especially post the surprising monetary policy announcement but retraced following aggressive RBI sale of foreign exchange as well as benign trade numbers.
There was a positive surprise in India’s external account with November trade deficit declining sharply. The decline was owing to sharp decline in imports while exports numbers were in line with earlier trend.
Most of the high frequency growth data in India continued to be fairly healthy reflecting decent growth momentum. Global growth data showed some decline in momentum in emerging markets, particularly China and Europe even as US economic data continued to be strong.

Outlook

The conducive environment for playing tactical overweight duration call through Government Securities still prevail and we are thus maintaining that positioning in our portfolio while retaining the flexibility to quickly react to both favourable and adverse market developments.

Source: Bloomberg, ABSL AMC Internal Research

Portfolio Action

Aditya Birla Sun Life Short Term Opportunities Fund (An open ended short term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 1-3 years):

The fund has a good quality accrual portfolio. Global cues (Crude, Trade Tension; Currency) have dominated the headlines in last few months. With crude coming down and INR settling in a range, INR Rates have seen some relief. In addition, regular open market operations (OMOs) by RBI has given a positive twist to the rates market.
Aditya Birla Sun Life Credit Risk Fund (formerly known as Aditya Birla Sun Life Corporate Bond Fund) (An open ended debt scheme predominantly investing in AA and below rated corporate bonds):

The fund has a diversified accrual portfolio with adequate liquidity. We have been careful in adding adequate security layers, in the form of collaterals and covenants, while underwriting trades. Presently, given the current circumstances, we have become a bit more cautious while making investments.
Aditya Birla Sun Life Medium Term Plan (An open ended medium term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 3-4 years):

We have been managing this fund with the dual objective of building a good quality accrual portfolio along with managing the duration actively. Presently, given the current circumstances, we have become a bit cautious and have increased G-sec allocation in the portfolio.

All the data mentioned above is as on 31st October, 2018

Aditya Birla Sun Life AMC Ltd /Aditya Birla Sun Life Mutual Fund is not guaranteeing/offering/communicating any indicative yield/returns on investments

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

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