Union Budget FY19-20 focused on policy continuity & sustainable growth while not compromising on fiscal consolidation and macro stability.

The Government has extended a 6-month window of one time guarantee for first loss up to 10% for purchase of high rated pooled assets of financially sound NBFCs to INR 1 lakh Cr.

The government is looking to raise a part of its gross borrowing program in external markets in foreign currencies. This may drive bond yields lower in India.

Headline Consumer Price Index inflation continued to remain benign at 3.05% YoY in May, similar to the previous month. Core inflation reduced to 4.1% whereas food inflation rose to 2.03%. Fiscal deficit target was reduced to 3.3%, compared to 3.4% in the interim budget.

Outlook

There is a possibility that RBI will continue with further monetary easing with government sticking to the fiscal targets, low hike in Minimum Support Price, growth slowdown, benign inflation and positive global backdrop for rates.

The bond market in India looks constructive, there is a possibility of bond rally to continue especially in the shorter end of the curve.

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 growth outlook remains benign with International Monetary Fund (IMF) reducing the global growth forecast and the protracted US-China trade tensions. Domestic growth and inflation outlook is also benign. These factors remain supportive for bonds. However, crude uptick is a risk.

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. Long term investors may continue to invest in the fund.

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. We aim to add credit structures to our fund whenever appropriate opportunities appear in the credit markets.

All the data mentioned above is as on June 30th, 2019

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.