SBI DYNAMIC BOND FUND This product is suitable for investors who are - PowerPoint PPT Presentation

SBI DYNAMIC BOND FUND

This product is suitable for investors who are seeking:  Investment in debt and money- market securities  Regular income for medium term  Moderate risk SBI Dynamic Bond Fund Disclaimer: Investors should consult their financial advisors if in doubt whether this product is suitable for them.

SBI Dynamic Bond Fund Features Instruments % of Net Assets Risk  Actively managed fund with the flexibility to (Min – Max.) Profile invest in overnight maturity papers to high duration papers, it may move across different Debt # Instruments 0 - 100% Medium including Government asset types from money market to medium/long Securities and bonds and G- sec based on the fund manager’s Corporate Debt outlook Money Market 0 - 100% Low Instruments  The Fund is best suited in volatile markets as # Debt Instruments may include securitized debt up to 40% of the net assets it endeavours to capture the best of duration 20 play, interest rate movements& credit 16 spreads. The fund focuses on generating 12.98 11.92 11.55 returns by way of market movements rather 11.45 10.32 10.51 11.03 12 10.49 9.21 than through interest accrual 8.63 6.66 8 4.49 4  Average maturity is dynamically managed based on interest rate view, inflation & credit 0 risk

SBI Dynamic Bond Fund Performance 16.0 14.0 SBI Dynamic Bond Fund - Reg Plan - Growth 12.0 10.0 8.0 Scheme Benchmark: - Crisil Composite Bond 6.0 Fund Index 4.0 2.0 Additional Benchmark: - Crisil 10 Yr Gilt Index 0.0 31-Mar-2016 to 31-Mar-2015 to 31-Mar-2014 to Since Inception 31-Mar-2017 31-Mar-2016 31-Mar-2015 Since Inception 31-Mar-2016 to 31-Mar-2015 to 31- 31-Mar-2014 to 31- 31-Mar-2017 Mar-2016 Mar-2015 CAGR Returns PTP Returns Absolute Returns (%) (%) (INR) SBI Dynamic Bond Fund 13.62 5.57 13.69 5.65 20,600 Crisil Composite Bond Fund Index (Scheme Benchmark) 11.09 8.24 14.59 6.75 23,617 Crisil 10 year Gilt Index (Additional Benchmark) 11.87 7.97 14.57 5.80 20,995 Past performance may or may not be sustained in future. Returns (in %) other than since inception are absolute, calculated for growth option of regular plan and in INR are point-to-point (PTP) returns calculated on a standard investment of 10,000/-. Additional benchmark as prescribed by SEBI for long-term debt schemes is used for comparison purposes. Data as on March 31, 2017

SBI Dynamic Bond Fund Competitive Advantage Strategic Asset Allocation Short term – corporate Long term – Corporate Short term – Govt Bonds Long term – Govt Bonds credit Credit Change in systemic liquidity Change in systemic Change in monetary Spread reversion w.r.t driven by factors such as liquidity driven by factors stance. medium term levels. credit deposit growth and such as credit deposit Assessment of fiscal currency in circulation. growth and currency in situation. Changes in relative attraction circulation. Shape of the yield curve. between offshore and Policy rate actions. domestic funding avenues. SLR holdings of banks. Policy rate actions. RBI's open market operations. Appetite from insurance co’s The issuance calendar of and PF's Movement in commodity bills. and forex markets . Movement in commodity and forex markets Tactical Asset Allocation Change in systemic liquidity driven by factors such as • Supply issues for all segments • News flow • Global developments • Market positioning •

SBI Dynamic Bond Fund – Competitive Advantage - Instances Strategic Asset Allocation Market analysis & call: (March 2012)  With the commencement of borrowing by the government in the new financial year, government bonds were expected to underperform  With demand for wholesale funds from banks & consequent year end tightness, money market rates were at elevated levels. 1 year CD’s during March were at 10.75-10.85%.  The short end corporate bonds (2-3 yrs.) at 9.65-9.70% levels were also fairly priced vis-à-vis G-Sec considering moderate supply pipeline.  On account of above we invested 90% of our assets in 1 year CD and balance in the ST corporate bond segment. Yield on March 10, 2012: Yield on April 21, 2012: Securities 1 Year 2-3 Year 10 Year Securities 1 Year 2-3 Year 10 Year G Sec 8.26 8.30 G Sec 8.22% 8.58% Corporate bonds 9.66 9.39 Corporate bonds 9.46% 9.35% CD 10.80% CD 9.80% Past performance may or may not be sustained in future. Source: SBIMF Internal Analysis & Bloomberg

SBI Dynamic Bond Fund – Competitive Advantage - Instances Tactical Asset Allocation Market analysis & call: (May- July 13)  RBI policy guidance had stressed on external sector factors driving policy actions  Weakening external sector variables had impacted Forex market trends, even as markets where anticipating additional policy cuts during this period  The newly issued 10 year government bond yield which traded at 7.11% in end May closed at 8.17% on 31 st July post the RBI measures.  Considering the broad concerns on Forex trends and remote possibility of rate cuts, we had reduced duration in the fund during this period. Modified duration of the fund Date Average Maturity- Yrs End May 13 10.25 End June 13 7.43 End July 13 5.01 Past performance may or may not be sustained in future. Source: SBIMF Internal Analysis

SBI Dynamic Bond Fund – Current Strategy • Lower GDP growth SDBF aims to • Monsoon Deficit build mid and • Chinese Yuan long term devaluation expectations on • Fed Rate Hike rate trajectory uncertainty Portfolio maturity has been increased through exposure to SDL’s and UDAY Bonds (35%), 10 year AAA corporate bonds (9%) and Gsec (35%.) Average maturity of the fund stands at 10.32years. SDBF aims to actively react to • Impact of Forex flows tactical • Effects of Geo- opportunities in political Events the market

India Rates Snapshot for April 2017 Feb-17 Mar-17 Apr-17 m-o-m change (in bps) Change YTD (in bps) 1 Yr. T-Bill 6.33 6.17 6.21 31 8 3M T-Bill 6.20 6.20 6.10 40 -2 10 year GSec 6.52 6.41 6.87 28 45 3M CD*** 6.28 6.33 6.38 5 7 12M CD*** 6.63 6.55 6.93 15 13 3 Yr Corp Bond* 7.29 7.07 7.27 16 30 5 Yr Corp Bond* 7.37 7.33 7.54 14 34 10 Yr Corp Bond* 7.58 7.57 7.83 8 32 1 Yr IRS 6.19 6.20 6.42 11 34 5 Yr IRS 6.26 6.32 6.70 18 56 Overnight MIBOR Rate 6.25 6.25 6.05 -119 -7 INR/USD 67.9 67.9 66.7 0.9 5.7 # Crude Oil Indian Basket** 52.7 54.2 54.8 2.1 -0.2 # • Indian bond yields rose dramatically in February as RBI changed its monetary policy stance from accommodative to neutral and continues to stay high relative to the start of the year. • Money market rates, too, inched up a bit in April, post the RBI’s decision to suck out nearly Rs. 1 trillion worth of liquidity via the issuance of CMBs. • Crude oil prices rose 2.1% over the month but remains flat on YTD basis. • Rupee has appreciated sharply on YTD basis owing to massive FII inflows in the debt and equity market. Source: Bloomberg, PPAC, SBIMF Research; NB: **Crude oil price is average $/barrel for the month, rest of the data are % month end; *Corporate bond rate is for AAA rated bonds ,*** Refers to PSU Banks CD rate; # INR and Oil price changes are % change

Policy Rate Outlook  Monetary Policy Committee (MPC) kept the repo rate unchanged at 6.25% in its latest meeting on 6 th April 2017.  It has however narrowed the policy corridor from 50bps on either side of the repo rate to 25bps to now. Accordingly, the reverse repo 10.00 rate stands at 6% (5.75% before) and the rate under the marginal standing facility stands at 6.5% (6.75% before). 9.00  The narrowing of the corridor has been done in response to the 8.00 benign liquidity conditions which had led short-term rates to fall below the policy rate. The rate on the 3mth T-bill rate had fallen to 7.00 almost 50bps below the repo rate in March. The narrowing of the 6.00 band will increase the lower bound of the yield curve to 6% and also lower the volatility in short-term rates. 5.00  The central bank has indicated that going forward, it will continue to 4.00 use its existing bouquet of instruments (LAF, term repos, cash Jun-05 Feb-06 Oct-06 Jun-07 Feb-08 Oct-08 Jun-09 Feb-10 Oct-10 Jun-11 Feb-12 Oct-12 Jun-13 Feb-14 Oct-14 Jun-15 Feb-16 Oct-16 management bills, MSS) to manage the excess liquidity in the near-term. Repo Rate (mth end, %)  Looking ahead, the RBI remains cautious on the inflation trajectory and believes that achieving the 4% mark will not be easy. Seemingly, the central bank remains wary of upside risks to inflation more even though it highlighted that risks are evenly balanced. On the other hand, it expects the growth to improve in FY18 on the back of government spending, higher consumer spending and transmission of earlier rate cuts.  In our opinion, given the current outlook on inflation and growth, additional policy rate cuts are unlikely in 2017. Source: RBI, CSO, SBIFM Research