HDFC MF Yearbook 20211Refer disclaimers on slide 98
2020: The Black Swan Year!It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is mostadaptable to change----- Charles DarwinYear 2020 was another year when humans across the world showed tremendous resilience andfought the pandemic. We salute and commend the great efforts put in by our front-line Covid-19warriors and all those who contributed towards the fight against the pandemic.HDFC group pledged Rs150cr contribution to the PM CARES Fund to provide relief and rehabilitation measures towards theCovid-19 pandemic. Our Group Chairman, Mr. Deepak Parekh remarked “These are uncertain and trying times for all of us.The HDFC Group’s support to the PM CARES Fund is to commend the exemplary efforts of the Central & State Governments,armed & paramilitary forces, local police, healthcare professionals and sanitation workers across the country working tirelesslyto fight the pandemic. He also added that “I am certain we will emerge a stronger, more conscious & compassionate nation” inthe aftermath of Covid-19.Source: Media articles published in April 20202Refer disclaimers on slide 98
Contents1. Global Economy and Markets2. Key Future Trends3. Indian Economy4. Equity Markets & Sector Overview5. Fixed Income Markets3Refer disclaimers on slide 98
Global Economy and MarketsWe are quick to forget that just being alive is an extraordinary piece of good luck, a remoteevent, a chance occurrence of monstrous proportions. – Nassim Nicolas Taleb4Refer disclaimers on slide 98
Covid-19 : A return of the old enemy of humansBrief Introduction Covid-19 is a virus belonging to coronavirus family like SARS, MERS, etc.‒ Widely believed to have originated in Wuhan, China. It quickly spread toother countries and was declared a global pandemic by WHO in Mar 202060,00050,00040,000EU, RHSIndiaUSA, RHS200,000100,000 As on 27 Dec 20, it has infected over 80 mn across 200 countries10,000 Few countries are experiencing a 2nd wave of Covid -19 infections with higherintensity and higher number of cases than the first ctive cases (in millions)12.0Vaccine development and Herd immunity2.0 1.5Vaccine is a substance used to actively acquire immunity against a particularinfectious diseaseJapanUK150,00020,000Active cases trending higher in US, UK and EU but falling in India, China, etc.China30,000Current Status 250,000Daily New Cases - 7DMAChinaJapanUKEU, RHSIndiaUSA, RHS10.08.06.01.0 Herd immunity is achieved when a sufficient proportion of a population hasbecome immune to an infection. Two alternatives to achieve herd immunity–50-60% of population is infected–Vaccinate and immunize 70% of population* Vaccines for Covid-19 were developed in a record time of less than one yearas against a typical development time of 10 years Developed markets (DMs) likely to achieve herd immunity by CY21 andEmerging Markets (EMs) by CY22/23*assuming 90% efficacy of /20Dec/20Estimated doses Estimated doses Total dosesfor herdto vaccinatevia supplyimmunity (60% of100% ofcontractspopulation) (mn) population 55250540India18003000400Source: Morgan Stanley, JM Financials, Updated till 27 Dec 20205Refer disclaimers on slide 98
Covid-19 : A Black Swan event While the symptoms of Covid-19 are similar to that of common flu,mortality rate is nearly 10 times higher. Mortality rate is even higher forelders and people with co-morbidities8.0%AgeCovid MortalityRate* 2930 to 3940 to 490.1%0.4%1.0%50 to 592.4%4.0%60 to 696.7%3.0%70 to 7916.6% 8028.7%Covid-19 Mortality Rate –Global rtality Rate Deaths/infections; Source: ourworldindata.org; statista.comNumber of Deaths by causes (in mn) in a year Total deaths in the world in 2019 were 55.4 mn ( 0.8% of the worldpopulation); Covid-19 caused 1.8 mn deaths in 2020 i.e. 3% of totaldeaths or 0.02% of the world population Though Covid-19 resulted in a low proportion of deaths, its short termeconomic impact was high-Q2CY20 experienced the highest decline in GDP in the past 50 years ! Covid-19 induced recession is the deepest since World War II and overtwice the intensity of global financial crisis (GFC)Heart diseaseCancerChronic respiratory diseasesLower respiratory infectionsAlzheimerDigestiveNeonatal disordersDiarrhealDiabetesCirrhosis/liverRoad ce: ourworldindata.org, 2017Quarterly GDP rate for OECD countries (%)5.0-5.0-10.0Oilembargoesand fall ofbretton woodsystemDotcombubble9/11GlobalCovid-19 CrisisFinancialCrisisSource: OECD-15.0 as on 31 December 202064 68 72 76 80 84 88 92 96 00 04 08 12 16 206Refer disclaimers on slide 98
Year 2020 : Initial disruption in Growth followed by a strong recoveryGlobal growth Varying degree of lockdowns impacted growth significantly in Q2CY20 butrecovery was strong in Q3CY20Global GDP growth likely to rebound in CY21 aided by base effect, vaccinesrollout, fiscal & monetary measuresNew wave of infections, delay in vaccine rollout & its efficacy, etc. are key risksUnited States (US) Quarterly Real GDP Growth, 7.9Sources: Morgan StanleyGlobal GDP Growth to normalise by CY22 (%)Unprecedented fiscal and monetary stimulus supported revival3.9Agenda of new President suggests that fiscal stimulus is likely to remain at anelevated level; US Fed likely to remain accommodative4.0Base effect, increase in savings, favourable fiscal and monetary stance likelyto support recovery-Unwinding of fiscal / monetary stimulus, rise in trade tensions with China, etc.are key risks5.26.04.23.73.83.623E24E2.0-2.0Source: IMF-4.0-4.4-6.0CY00-09CY10-1920E21E22EEuro Area Entered the crisis with slowing growth Fiscal and monetary stimulus post outbreak has supported recovery; 2nd wavehas led to reimposition of lockdown and thus can impact growth70%60%Contribution to Global Nominal GDP growthbetween CY19 and CY2160%50%China Source: IMF40%Efficient control of spread and unlocking have helped in economic reboundwith majority of indicators near pre-covid or higher levels30%Only major economy not expected to register de-growth in CY20. Growth likelyto improve sequentially10%34%20%14%1%1%UKJapan0%ChinaEuro areaUSAEstimated to contribute 60% to world GDP growth between CY19 and CY217Refer disclaimers on slide 98
Global Economy normalising : Manufacturing leads the recoveryMacro Indicators 1.920.530.93unprecedented measures taken by major Central banks and10Y German bunds ommodity Price IndexYoY3%-32%-2%FAO Food Price IndexYoY9%-3%6%Manufacturing IndicatorsUnitDeveloped Markets IIPYoY-2%-19%-5%Emerging Markets IIPYoY3%-6%1%Manufacturing PMIIndex5039.653.7PV sales YoY-11%-43%-2%Steel ProductionYoY4%-13%7%Oil ConsumptionYoY2%-20%-6%Weekly YoY-13.2%-29.4%0.8%Industrial Indicators are pointing at a fast pace of recovery–Steel Demand is growing at healthy pace; oil demand lagsServices indicators are normalising at a slower paceOil PricesUS Mortgage application–Pre-Covid-19 Trough LatestDivergent trend across services; contact intensive and discretionaryservices are recovering at a slower pace Latest%Global Trade Index Pre-Covid-19 TroughUS 10Y YieldGovernments UnitEconomic indicators are stabilizing at a fast pace aided bySources of uncertaintyServices IndicatorsUnitServices PMIIndex5223.752.2US Consumer %-77%%66.42137.4YoYNA-100%-62%Global total flights–With rise in virtual meetings, outlook on aviation / transportation–Impact on incomes and job creation due to accelerated automation andUS Hotel Occupancyaggressive cost cuttingNo. of seated diners (World)Aviation Revenue per KMPre-Covid-19 TroughSources: JM Financials, Bloomberg, CEIC, Includes: Germany, France, US, UK, China, India, Japan, Russia and BrazilFor the purpose of the Pre-Covid-19 data, average or data point for Dec 2019 is taken. Latest data is for month for which latest data is available as on 24 Dec 20208Refer disclaimers on slide 98Latest
Recovery aided by unprecedented fiscal and monetary .8India-6.3-7.9-13.1-10.9–––Policy rates were reduced to near all-time lowsAggregate balance sheet size of 6 largest Central banks rose 40% YoYHelped ease G-sec yields and credit spreads-10.0Advanced Economies-15.0Emerging Market Economies-20.0Rising Central Banks Balance sheets 40.0%34.2%35.0%30,000Sum of Central banks Balance sheets30.0%23.7%25,000USD bnCentral Banks also aggressively unveiled liquidity easingmeasures-5.0Source: IMF World Economic Outlook October 202035,000 2021E-6.8-8.8-5.8Euro Area2020E0.0-14.2-10.4 Fiscal deficits (FD) are set to widen across board on back oflower revenues and fiscal stimulusUnited States2019-3.3-4.9 In response to the pandemic, countries unleashed unparalledfiscal and monetary stimulus to cushion its economic impact2018-2.7-3.8Fiscal Deficit as % of GDPFD (% of GDP) 2018 2019 2020E 2021E25.0%% to world -0.0%2002200520082011201420172020ESource: Bloomberg; JM Financials Public debt to GDP is at record levels140.0–Sovereign debt likely to jump by 20% from pre-covid levels–Fiscal consolidation is likely over the next couple of years–DMs likely to add more debt in CY19-21 than in last 9 years115.090.065.0DMsGovernment Debt as % of GDPEMs124.1124.2104.2102.9Source: IMF64.061.449.852.140.0201820192020E2021EOur inability to look beyond the latest news cycle could be one of the most dangerous traits of our generation--- Richard Fisher, Ex-President and CEO of the Federal Reserve Bank of Dallas Summation of Central Banks balance sheet size of US, ECB, China, UK and Japan9Refer disclaimers on slide 98
Lower yields and spreads, higher savings and unemployment %10Y Gsec yields softened%4.03.0Gsec yields moderated driven by risk off sentiments and huge monetary stimulusacross t Spreads have normalisedCredit spreads that spiked in March 2020 have largely normalised%1.0 Peak8.414.7Pre-Covid-19152.3higher than pre-covid levels except in ChinaDec/20Unemployment Rate (%)6.7Unemployment rates, that rose in aftermath of pandemic, have improved but are still3.5 Aug/20US 20.0Household (HH) savings rate rose sharply due to limited avenues to spend and fiscalstimulus to support employment, especially in DMs. Will higher savings lead to morespending next year as normalcy returns remains to be seen15.0JapanEuroChinaGlobal HH Savings rate (4Q movingaverage, As % of GDP)10.05.0- Credit spreads - Difference between Bloomberg Barclays US Aggregate 1-3 years index and US 2 Year Govt Bond YieldUSJapanEU-5.0Sep/13 Sep/14 Sep/15 Sep/16 Sep/17 Sep/18 Sep/19 Sep/20Source: Bloomberg, JM Financials; Data updated till 24 December 202010Refer disclaimers on slide 98
Covid-19 Paradox : Economy down, Asset prices UpReturns in 2020 (%)42.7 26.4Though Covid-19 impacted economy and life adversely, most24.118.914.612.2S&P 500NIFTY 508.9asset classes witnessed significant appreciation driven by––NASDAQLower cost of capital and high liquidityCopperGoldAgri index US Treasury -22.3Source: Bloomberg; Updated till 24 Dec 2020 Bloomberg Agri Index, Bloomberg Barclays US treasury TR IndexLow impact of one year GDP decline on intrinsic values ofassets (for more on this, refer Slide 57)–Oil45Growth in S&P 500 Net Profit (YoY, %)Lower than expected impact on corporate profits and23expectation of strong growth61610181740-1-11 World market cap / GDP is significantly above long term averageSource: Bloomberg, JM Y20E CY21E CY22E– Based on CY21 GDP, World Market cap to GDP is 110%Average (%)5Y10Y15YWorld Market cap to GDP938583– Net profit / GDP ratio of S&P 500 companies is also likely to benear all time high based on CY22E120%World Market Cap to GDP8%100%6%80%4%60%2%S&P net profit as % of GDP0%00 03 06 09 12 15 18 21E03 05 07 09 11 13 15 17 19Source: Bloomberg, IMF Estimated GDP for CY 2020 used; Updated till 24 Dec 202040%If you look at P/Es, they’re historically high. But in a world where the risk free rate is going to be low for a sustained period, the equity premium which is really the rewardyou get for taking equity risk, would be what you’d look at. And that’s not at incredibly low levels, which would mean that they’re not overpriced in that sense. AdmittedlyP/Es are high but that’s maybe not as relevant in a world where we think the 10-year treasury is going to be lower than it’s been historically from a term perspective–Jerome Powell, Chairman, US Fed Reserve speaking at a Press Conference on 17 December 202011Refer disclaimers on slide 98
Commodities : Sharp rebound in prices in 2020 - Aluminium price ( /ton)Zinc price ( /ton)China steel prices ( /ton)Metal prices witnessed a sharp rebound after easing of lockdowns—pricesare now higher than Pre-Covid-19 levels for base metals / steel700600Rebound in demand post easing of lockdowns especially in China which isfurther fueled by large stimulus and infrastructure spending1,950-Supply disruptions in many countries due to regional lockdowns, logisticsand labor availability issues1,200Dec-18-Fall in interest rates and USD weakness (refer slide 13)-Structural under-investment in supply of most of commodities due to adecade of poor returns. Last decade (2008-2018) saw under-investment incapital intensive sectors including metals & mining (refer to slide 18)500Spot base metal and iron ore prices are trading higher than 90 th percentile cost curveDec-19Jun-20China steel demand (mn tons)growth yoy (%) [RHS]400Dec-20China steel exports (mn tons)growth yoy (%) [RHS]10020%88015%66010%405%200%Mar-20Copper—90th percentile costsZinc—90th percentile costsCopper price (US /ton)Zinc price (US /ton)8,000Jun-19Strong China demand / less export drive steel pricesSpot prices trading higher than 90th percentile for base metals & iron-ore10,0008002,700Multiple factors driving price rally:- Metal prices rebound sharply in 2020 & cross Pre-covid levelsMetals prices saw a sharp rally in -20Iron-ore—90th percentile costs4,0002003,0001502,0001001,00050Iron-ore price (US 020Source: Macquarie Capital Securities, Bloomberg12Refer disclaimers on slide 98
Commodities : Interest rates, USD, etc also impact prices Investment demand and impact of lower interest rates: Interest ratesalso impact commodity prices directly through investment demand:-Lower interest rates help in investment demand by reducing the carryingcost of inventories. If interest rates are low, large global traders andinvestment banks are able to hold commodities inventory at low carryingcosts and sell it in futures market at a premium (contango)Lower interest rates aid commodity prices via investment demandLME copper prices (USD/ton)US government 10 yr rates (%) [RHS]9,4004.07,9002.06,4004,900Nov-18 Weakening USD supports commodity prices: Costs of commoditiesare in currencies of producing countries and strengthening of thesecurrencies against USD is price inflationary in USD termsMay-19Nov-190.0Nov-20May-20Weakening USD is inflationary for commoditiesLME copper prices (USD/ton)USD Index—exchange rate of USD vs world currencies [RHS] Cost curve: metal prices have tracked cost curves---Prices of metals have generally hovered around 90th percentile of globalcost curves—essentially meaning prices settle at levels where 90% ofmetal producers globally are cash positive and only 10% who are high costproducers are incurring lossesHowever, there are distortions—for example in aluminum in past 30 years,on an average 27% of time prices have been 10% higher than 90thpercentile of global cost curve and 17% of time prices have been 10%lower than 90th percentile. But, prices tend to revert to the mean i.e. 90thpercentile eventuallyAt present, prices are trading higher than 90th percentile for most of thebase -19Aug-19Feb-20Aug-20Aluminum prices and 90th percentile of global cost curveAluminum—90th percentile costs (US /ton)Aluminum price (US /ton)2,8002,4002,0001,6001,200800Source: Macquarie Capital Securities, Bloomberg199019952000200520102015202013Refer disclaimers on slide 98
Crude Oil - Peak Demand or Peak Supply - Which comes first ?Factors affecting DemandChart 1: Composition of Oil DemandChart 2: Peak oil demand in 2030?Chart 3: E&P capex is down 30%Chart 4: World still needs more oil EVs are a key headwind; transportation is 55% of oil demand Non-transport demand (45%) is likely to continue to grow Even with 10% EV fleet penetration, peak oil demand could be 107mn bpd* vs. 2019 at 100mn bpdFactors affecting supply The natural decline of conventional oil reservoirs is 5-7% p.a 2020 oil capex is down 30% due to lower oil prices World has consumed 1550bn bbls over past 150years; even withpeak demand in 2030, current 1P reserves (1123bn bbls) areinsufficient, implying need to find/develop another 680bn ars*Chart 5: History of Mercury prices and productionLesson from history of mercury prices Mercury demand peaked in 1970 and declined 80% by 2012 During 2004-12 despite lower demand, prices spiked 11x and 2012value of production was almost equal to peak in 1965-70 ! Key lesson is that if supply declines faster than demand due tounderinvestment etc. prices can surprise on the upsideNote: * Bernstein Research reportSources: IEA, USGC, Bernstein Research reports14Refer disclaimers on slide 98
Gold – Will the glitter continue ?– Global economic slowdown and uncertain environment increased thepopularity of Gold as a safe haven– Sharp reduction in policy rates and large monetary stimulus; 87% of major– Increase in negative yielding debt and negative real rates220020001518001016001400512000CY 15central Banks have cut policy rates in 2020 –highest level since GFC (Chart 2)Barclays Negative Yielding DebtGold Price (USD/Troy Ounce) (RHS)Gold Price (USD /TroyOunce) Gold prices have increased significantly in 2020 driven by following factorsMarket Value (USD Trn)Chart 12010001617181920Proportion of BanksChart 2100%– Large fiscal stimulus and USD depreciation80%60%40%20%Rate Cut Inflation adjusted gold prices are near all time highs and hence the outlookChart 3800No 200920080%Rate HikeInflation adjusted gold pricesfor gold prices remains uncertainUSD600400Did You know?200Indian households are holding highest amount of gold in the world which is around 24,000tonnes* and is worth more than USD 1.5 trn0CY50 55 60 65 70 75 80 85 90 95 00 05 10 15 20Source: Bloomberg, BIS; Data updated till 24 Dec q1-20-5888830615Refer disclaimers on slide 98
Global currencies movement In 2020, currencies of DMs appreciated against the USD, while EMcurrencies (excluding China) depreciated driven by –massive fiscal and monetary stimulus by US–uncertainty resulting in risk off
HDFC group pledged Rs150cr contribution to the PM CARES Fund to provide relief and rehabilitation measures towards the . Global Economy and Markets 2. Key Future Trends 3. Indian Economy 4. Equity Markets & Sector Overview 5. Fixed Income Markets 3. . Developed markets (DMs) likely to achieve herd immunity by CY21 and Emerging Markets .
Source: Annual Reports of SBI and HDFC of various years From the above table is observed that operating profit has a hiking trend for both SBI and HDFC over the years and mean of operating profit of SBI is higher than HDFC. Table-4:Net profit of SBI and HDFC Bank during the year 2013-14 to 2017-18 Rs. in Crore Particu lars 201 3-14 201 4-15
HDFC Balanced Advantage Fund is similar to that of erstwhile HDFC Prudence Fund, the track record (i.e. since inception date, dividend history, etc.) / past performance of erstwhile HDFC Prudence Fund have been considered, in line with SEBI circular on Performance disclosure post consolidation/ merger of scheme dated April 12, 2018.
Yearbook of Astronomy Glossary Compiled by Brian Jones, David Harper and L. M. Stockman The 2018–2021 editions of the Yearbook of Astronomy include a Glossary at the back of the book. However, due to the increasing length of the Glossary, it has been decided to remove it from the book and instead publish it on the Yearbook of Astronomy website in the form of a
Address Colombo 2 HDFC Bank, P.O.Box 2085, Sir Chittampalam A.Gardiner Mawatha 13. Dat e, time and venu for opening of Proposals 2.00pm 26th July 2021 HDFC Bank, P.O.Box 2085, Sir Chittampalam A.Gardiner Mawatha Colombo 2 , Sri Lanka. 14. S ignin gof A reement Within 07 days from the date of issuan
Glossary and curriculum alignment. HOW TO YEARBOOK EXPLORE OUR COMPREHENSIVE CURRICULUM. 3 WELCOME TO THE HERFF JONES YEARBOOK FAMILY. By now, you probably know your rep and have that number on speed dial. But did you know you’re part of a network of yearbook advisers, who all
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MIDDLE SCHOOL YEARBOOK SALE To order your 2016-2017 Middle School yearbook go to the following website: ybpay.lifetouch.com. Enter the Yearbook ID code 11056517 and then follow the easy on screen ordering instructions. The cost is 18.00 and all major credit cards are accepted. The Middle School will not be handling any yearbook payments.