The Benchmark 10-Year Gsec yield closed at 7.41% up by 6 bps based on month end values. The yields hardened despite the Monetary Policy Committee (MPC) delivering a 25bps rate-cut in the month of April. This upward movement of yields clearly highlights that, in addition to the rate cut market was anticipating a change in the policy stance. Read the full document to know more.

1. May 2019
Market Update
Interbank call money rates hovered above the RBI’s repo rate of
6.00% during the month as overall systemic liquidity experienced
some tightness on firm fund demand from banks to meet their
mandatory reserve requirements. However, the central bank
prevented the call rate from rising too high by intermittently infusing
funds via term repo auctions. Meanwhile, the RBI’s second dollar-
rupee swap auction received a total of 255 bids worth $18.65 billion,
against its offer of $5 billion.
Currency in circulation rose 15.8% year on-year in the week ended
April 19, 2019, compared with 33.3% growth a year ago. The RBI, via
its liquidity window, injected Rs 753.40 billion on a net daily average
basis in April 2019, compared with net liquidity injection of Rs 562.02
billion in March 2019.
Bank credit growth rose 14.2% year on-year in the fortnight ended
April 12, 2019, compared with 14.5% year on-year growth reported
in the fortnight ended March 15, 2019.
Source: CRISIL, data as on April 30, 2019
Data Source – RBI, Mospi.Nic.in, CRISIL Fixed Income Database, LAF – Liquidity Adjustment Facility, MSF – Marginal Standing Facility, SLF – Standing Liquidity Facility, CP - Commercial Paper, CD – Certificate
of Deposit, CB – Corporate Bond, IIP – India Industrial Production, CPI – Consumer Price Index, WPI – Wholesale Price Index, CAD – Current Account Deficit, GDP – Gross Domestic Product
Macro Update
Macro Economy Data Release
Indicator Latest Update Previous Update
IIP 0.1% (Feb) 1.4% (Jan)
GDP 6.6% (3QFY19) 7.0% (2QFY19)
USD/INR 69.56 (Apr) 69.11 (Mar)
WPI 3.18% (Mar) 2.93% (Feb)
CPI 2.86% (Mar) 2.57% (Feb)
Credit Spread Data in basis points
Tenure AAA AA A
1Y 1.32% 1.80% 2.16%
3Y 0.80% 1.35% 2.24%
5Y 0.67% 1.30% 2.32%
10Y 0.88% 1.63% 2.68%
Average Liquidity Support by RBI
Rs 753.40 billion (Includes: LAF, MSF, SLF & Term Repo)
Bank Credit Growth Bank Deposit Growth
14.2% 10.6%
Money Market
Tenure CD Change* CP Change*
1M 7.35 70 7.50 45
3M 7.36 71 7.80 75
6M 7.45 35 8.35 50
12M 7.76 56 8.55 60
Bond Market
Tenure G-Sec Change* AAA CB Change*
1Y 6.57 14 7.80 45
3Y 7.06 40 7.96 36
5Y 7.34 40 8.15 40
10Y 7.41 7 8.44 22
* Change in basis points (bps)
Crude: London Brent crude oil prices (up 6.5%) continued with its
uptrend in April to close at $72.80 per barrel on April 30, 2019 vis-à-
vis $68.39 on March 29, 2019 owing to a) signs of tightening
supplies following conflict in Libya, b) receding worries over global
economic growth, and c) after the US said that it would end the
waivers for countries to import Iranian oil.
Inflation: Consumer Price Index (CPI)-based inflation increased, for
the second consecutive month, to 2.86% in March 2019 from
2.57% in February 2019. The uptick was driven by a positive turn in
food inflation and marginally higher fuel inflation, even as core
inflation softened a bit.
Currency: The rupee weakened against the US dollar in April, with
the exchange rate settling at Rs 69.56 per dollar on April 30 as
against Rs 69.11 per dollar on March 29, as sentiment was hit by
the RBI’s retention of a ‘neutral’ stance despite cutting the repo
rate. Encouraging US economic indicators such as non-farm
payrolls data strengthened the greenback and pulled the rupee
down. Intermittent rise in crude oil prices and data that showed a
widening in India’s trade gap also triggered rupee selling. The
rupee also received some support after the central bank’s forex
swap auction conducted towards the end of the month saw better-
than-expected demand.
Gilts: Gilts ended lower in the month with yield on the 10-year
benchmark 7.26% 2029 paper ending at 7.41% on April 30, 2019,
compared with 7.35% on March 29, 2019.
Source: CRISIL, data as on April 30, 2019.
Data Source – RBI, Mospi.Nic.in, CRISIL Fixed Income Database, LAF – Liquidity
Adjustment Facility, MSF – Marginal Standing Facility, SLF – Standing Liquidity Facility, CP
- Commercial Paper, CD – Certificate of Deposit, CB – Corporate Bond, IIP – India Industrial
Production, CPI – Consumer Price Index, WPI – Wholesale Price Index, CAD – Current
Account Deficit, GDP – Gross Domestic Product
FIXED INCOME UPDATE

2. Our Outlook
The Benchmark 10-Year Gsec yield closed at 7.41% up by 6 bps based on month end values. The yields hardened despite
the Monetary Policy Committee (MPC) delivering a 25bps rate-cut in the month of April. This upward movement of yields
clearly highlights that, in addition to the rate cut market was anticipating a change in the policy stance.
Also, the 25 bps cut transmission was limited, as the liquidity was in the deficit mode due to Government running high
surplus balance with RBI. The short term rates (3 Month CD) continue to remain at an elevated spread of 136 bps over the
repo rate. Owing to this, the RBI has increased Open Market Operations (OMO) purchases since last few months and
implemented a new monetary tool in the form of dollar swap.
Going forward, we believe the next rate cut would be data-dependent as the RBI may want to see certain risks play out
such as the general elections, uncertainty in oil prices, probability of El Nino effects in 2019 and the Budget to be presented
post elections. At this juncture, a series of rate cut looks challenging as the best of food deflation is behind us.
From the strategy point of view, we continue to remain sanguine towards the short end of the yield curve and on spread
assets. We believe that the risk-reward benefit is still favorable in the 1-3 Year segment of the yield curve and spread assets
provide better margin of safety. However, we may tactically alter duration based on the spread opportunity available in
different market segment.
Debt Valuation
Debt Valuation Index considers WPI, CPI, Sensex YEAR-ON-YEAR returns, Gold YEAR-ON-YEAR returns and Real estate YEAR-ON-YEAR returns over G-Sec yield, Current
Account Balance and Crude Oil Movement for calculation.
1
2
3
4
5
6
7
8
9
10
Ultra Low Duration
Low Duration
Moderate Duration
High Duration
Aggressively in
High Duration
2.82

3. Our Recommendation
For new allocations we recommend short to medium duration, accrual based schemes or dynamically managed schemes.
Our Recommendations
Cash
Manage
ment
Solutions
ICICI Prudential Floating Interest Fund (An open ended debt scheme predominantly
investing in floating rate instruments (including fixed rate instruments converted to
floating rate exposures using swaps/derivatives)
ICICI Prudential Ultra Short Term Fund (An open ended ultra-short term debt scheme
investing in instruments such that the Macaulay duration of the portfolio is between
3 months and 6 months)
ICICI Prudential Savings Fund (An open ended low duration debt scheme investing
in instruments such that the Macau- lay duration of the portfolio is between 6
months and 12 months.)
These schemes
aim to benefit
from better risk
adjusted returns
Short
Duration
Scheme
ICICI Prudential Short Term Fund (An open ended short term debt scheme investing
in instruments such that the Macaulay duration of the portfolio is between 1 Year
and 3 Years)
ICICI Prudential Banking & PSU Debt Fund (An open ended debt scheme
predominantly investing in Debt instruments of banks, Public Sector Undertakings,
Public Financial Institutions and Municipal Bonds)
ICICI Prudential Corporate Bond Fund (An open ended debt scheme predominantly
investing in AA+ and above rated corporate bonds.)
These schemes
aim to benefit
from mitigating
interest rate
volatility
Accrual
Schemes
ICICI Prudential Medium Term Bond Fund (An open ended medium term debt
scheme investing in instruments such that the Macaulay duration of the portfolio is
between 3 Years and 4 Years. The Macaulay duration of the portfolio is 1 Year to
4 years under anticipated adverse situation)
ICICI Prudential Credit Risk Fund (An open ended debt scheme predominantly
investing in AA and below rated corporate bonds)
These schemes
aim to benefit
from capturing
yields at elevated
levels.
Dynamic
Duration
Scheme
ICICI Prudential All Seasons Bond Fund (An open ended dynamic debt scheme
investing across duration)
This scheme aims
to benefit from
volatility by
actively managing
duration.
None of the aforesaid recommendations are based on any assumptions. These are purely for reference and the investors are requested to consult their financial advisors
before investing. Note: The Macaulay duration is the weighted average term to maturity of the cash flows from a bond. The weight of each cash flow is determined by
dividing the present value of the cash flow by the price.
Riskometer
ICICI Prudential Ultra Short Term Fund is suitable for investors who are seeking*:
 Short term regular income
 An open ended ultra-short term debt scheme investing in a range of debt
and money market instruments
*Investors should consult their financial advisers if in doubt about whether the
product is suitable for them.

4. ICICI Prudential Savings Fund is suitable for investors who are seeking*:
 Short term savings
 An open ended low duration debt scheme that aims to maximize income
by investing in debt and money market instruments while maintaining
optimum balance of yield, safety and liquidity
*Investors should consult their financial advisers if in doubt about whether the
product is suitable for them.
ICICI Prudential Short Term Fund is suitable for investors who are seeking*:
 Short term income generation and capital appreciation solution
 A debt fund that aims to generate income by investing in a range of debt
and money market instruments of various maturities
*Investors should consult their financial advisers if in doubt about whether the
product is suitable for them.
ICICI Prudential Medium Term Bond Fund is suitable for investors who are
seeking*:
 Medium term savings
 A debt scheme that invests in debt and money market instruments with a
view to maximize income while maintaining optimum balance of yield,
safety and liquidity
*Investors should consult their financial advisers if in doubt about whether the
product is suitable for them.
ICICI Prudential All Seasons Bond Fund is suitable for investors who are seeking*:
 All duration savings
 A debt scheme that invests in debt and money market instruments with a
view to maximize income while maintaining optimum balance of yield,
safety and liquidity
*Investors should consult their financial advisers if in doubt about whether the
product is suitable for them.
ICICI Prudential Corporate Bond Fund is suitable for investors who are seeking*:
 Short term savings
 An open ended debt scheme predominantly investing in highest rated
corporate bonds
*Investors should consult their financial advisers if in doubt about whether the
product is suitable for them.

5. ICICI Prudential Credit Risk Fund is suitable for investors who are seeking*:
 Medium term savings
 A debt scheme that aims to generate income through investing
predominantly in AA and below rated corporate bonds while maintaining
the optimum balance of yield, safety and liquidity
*Investors should consult their financial advisers if in doubt about whether the
product is suitable for them.
ICICI Prudential Floating Interest Fund is suitable for investors who are seeking*:
 Short term savings
 An open ended debt scheme predominantly investing in floating rate
instruments
*Investors should consult their financial advisers if in doubt about whether the
product is suitable for them.
ICICI Prudential Banking & PSU Debt Fund is suitable for investors who are
seeking*:
 Short term savings
 An open ended debt scheme predominantly investing in Debt instruments
of banks, Public Sector Undertakings, Public Financial Institutions and
Municipal Bonds
*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.
In the preparation of the material contained in this document, the AMC has used information that is publicly available, including information
developed in-house. Information gathered and material used in this document is believed to be from reliable sources.
The Fund however does not warrant the accuracy, reasonableness and/or completeness of any information. For data reference toany third
party in this material no such party will assume any liability for the same. All recipients of this material should before dealing and or
transacting in any of the products referred to in this material make their own investigation, seek appropriate professional advice and carefully
read the scheme information document. We have included statements 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 monitory and interest policies of India, inflation, deflation, unanticipated turbulence in
interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in India and globally,
changes in domestic and foreign laws, regulations and taxes and changes in competition in the industry. All data/information used in the
preparation of this material is dated and may or may not be relevant any time after the issuance of this material. The AMC takes no
responsibility of updating any data/information in this material from time to time. The AMC (including its affiliates), the Fund 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. The recipient
alone shall be fully responsible/are liable for any decision taken on the basis of this material.
Disclaimer