India Investment Strategy

December 2023
Index

→ Global Macro 04

→ India Macro 16

→ Catalysts & Speed Breakers 21

→ India Fixed Income 26

→ India Equities 33

→ Asset Allocation 42

→ Appendix 46

Private & Confidential 2

Executive Summary
Global Macro
✓ The US economy is slowing down, with signs of stress emerging in the Household
and Corporate segment
✓ The Eurozone economy is experiencing a slowdown, reflected in a reduced 2023
GDP growth estimate of 0.6%. Germany's economic performance remains a notable
setback, and the ECB, acknowledging moderating inflation, indicates the conclusion
of its rate hike cycle, emphasizing the aim of maintaining rates to facilitate a
gradual return to the 2% inflation target.
✓ Despite some improvement in the economy, China faces deflation; a fiscal stimulus
is needed for potential recovery
Catalyst & Speed Breakers
✓ After 2 months of selling, FII flows remained flat in November 2023, while DIIs
remained net buyers.
✓ Liquidity reduced in the banking sector as RBI tightens regulatory measures
towards consumer credit and loan to NBFCs
✓ Recent state elections highlight potential impact on medium-term growth due to
freebie politics leading up to the May 2024 general election.
Auto – Automobiles & Auto Ancillary
The India Picture
✓ India is on track to meet its fiscal deficit target in FY24, driven by strong receipt
growth exceeding expenditures.
✓ Despite concerns over rising oil prices, the manageable current account deficit is
sustained by stable services exports. The October trade deficit increase is
attributed to festival demand and price effects.
✓ October's lead indicators signal robust economic activity, coupled with inflation
moderation to 5.02%. India's GDP is projected to grow over 6% in FY24/FY25
✓ In the 2Q24 earnings season, sectors like Power, Auto, Banks, and Infra witnessed
upgrades, while Metals, Chemicals, Retail/FMCG, and IT experienced downgrades.
Asset Allocation
✓ India Equities: We maintain an equal-weight (EW) allocation to India equities, vis-à-
vis the standard allocation for a risk profile. We continue to prefer Banks, Auto,
Utilities and Infra (through Cement and Building Material).
✓ Indian Fixed Income: Allocation of 25% - liquid funds + Arb Funds + Other Liquid
products, 35% - quality credit opportunities & HTM, 25% - duration strategies, and
15% - high yield debt opportunities
Private & Confidential 3
Global Macro: A H azy Picture
US Economy: Summary

US economy Slowing down on expected lines

▪ All the macro indicators like PMI, Unemployment, wage growth, Retail Sales and Inflation have been suggesting that US economy has been slowing down.

▪ As for Household capex, the affordability is very low at elevated mortgage rate (30-year) of more than ~7%

Signs of stress are emerging due to elevated interest rates amid economic slowdown:

▪ There are signs of stress in the Household and Corporate segment. Small banks which were struggling from commercial real estate crisis (office segment),
the additional stress emanating from household and corporate sector could potentially weigh heavy on their financials. The rise in long term yield can
potentially create crisis in the financial system as mortgage, car, credit cards and small business loans are at unsustainably high level albeit it has
come off recently owing to slowdown in the economy.

▪ US has been adding about $ 100bn in Debts every 8 days vs 4 days till first month of the 4th quarter (October-23). Situation has improved lately in
November month. However, given the fact that growth in interest payments has been outpacing the growth in tax receipts (+33% and -11%), the debt will
increase faster.( Debt to GDP ratio at 2022 end was 121%). Moody’s has lowered the US credit rating to negative from stable mainly due to this reason.

▪ The other potential financial crisis which could potentially happen are: ALM crisis at banks (Deposit migration to Money Managers for Market funds), MTM hit
on the investments of banks and insurance /pension cos, ALM crisis at Pension fund which uses derivative for the long-term hedges (Margin call for loss in
MTM positions), sell off in MF debt schemes which are giving huge losses and significant rise in delinquencies/bankruptcies in the household/corporate loans.

Fed has been on “Quantitative tightening” which has been pushing the bond yields higher

▪ Fed has been on a QT and has shrunk the balance sheet size by about $1 tn over last 1 year which is pushing the bond yields higher. However, it has come
off ( from ~5% to 4.4%) lately a bit owing to slowdown in the economy which drove the Equities higher (S&P 500 +8% since Oct. lows)

Will Fed pivot or let the economy enter hard land into recession ?

▪ The street is expecting rate cut to start from Jun-24 and soft landing. We continue to believe both are not possible outcome and hence either the fed
will blink, or we will have a hard landing into recession in CY2024.

Private & Confidential 5

US Economy has been Slowing Down, Labour Market Losing Steam

Composite PMI remains near ~50 level indicating slow down ahead Core inflation (W/O food & Fuel) to 4% level from a high of 6.6%

Composite PMI Core Inflation (YoY%)

55.0 7.5
54.3
53.0 6.6
6.5
51.0 50.7
5.5
49.0
4.5
47.0
4
45.0 3.5

Aug-23

Aug-22

Aug-23
Feb-23

Oct-22

Feb-23

Oct-23
Jan-23

May-23

Oct-23
Jun-23

Jan-22

Feb-22

Jun-22

Nov-22

Jan-23

May-23

Jun-23
Mar-23

Apr-22

May-22

Jul-22

Mar-23
Apr-23

Mar-22

Dec-22

Apr-23

Sep-23
Jul-23

Sep-23

Sep-22

Jul-23
Unemployment rate continues to go up Wage growth down by 260 bps since rate hike cycle started

4.0 Unemployment Rate (%) 8.0 Avg. Hourly Earnings (YoY%)

3.9
3.9 7
7.0 Start of the rate hike cycle
3.8
3.7
6.0
3.6
3.5
3.5 5.0
3.4 3.4
3.4 4.4
3.3 4.0
3.2
3.0
3.1

Aug-23
Aug-22

Nov-22
May-22

Oct-22

Jan-23

Feb-23

May-23

Oct-23
Mar-22

Jun-22
Apr-22

Mar-23

Apr-23

Jun-23

Jul-23
Jul-22

Sep-22

Dec-22

Sep-23
Jan-23 Apr-23 Jul-23 Oct-23

Source: Bloomberg, Spark PWM

Private & Confidential 6
Housing Market Showing Signs of Weakness

30 year Fixed-rate Mortgage is at 7.6%, highest since Dec 2000, the affordability is at all time
Housing sales data indicate slow down ahead
low which reflects in Home builder confidence index
Home Builder Confidence Index 30 Year Mortgage rate US(RHS) Existing Home Sales Pending Home Sales Index(RHS)

100 8.0 8,000 130

7.6
7,500
90 120
7.0
7,000
80 110
6,500
6.0
70 100
6,000

'000
60 5.0 5,500 90

%
5,000
50 80
4.0
4,500 76.9

40 70
40
4,000
3.0
30 3,790 60
3,500

20 2.0 3,000 50

Oct-12

Oct-21
Oct-04

Oct-19
Oct-13

Oct-15

Oct-17
Oct-10
Oct-11

Oct-14

Oct-16

Oct-18

Oct-20

Oct-22
Oct-23
Oct-02
Oct-03

Oct-05
Oct-06
Oct-07
Oct-01

Oct-08
Oct-09
Feb-14

Oct-14
Oct-13

Oct-16

Oct-18
Jun-14

Feb-15

Oct-15
Feb-16

Feb-17
Jun-17
Oct-17
Feb-18
Jun-18

Feb-19

Oct-19

Feb-21
Jun-15

Jun-16

Jun-19

Feb-20

Oct-20

Oct-21
Feb-22

Oct-22
Feb-23
Jun-20

Jun-21

Oct-23
Jun-22

Jun-23

Source: Bloomberg, Spark PWM

Private & Confidential 7
US Banking-Household Sector: Stress Has Been Building up Specially in the Small Banks

Delinquencies in Credit Card & Consumer loans have gone up in Commercial banks but not an However, situation has been worsening in Small banks which were already burdened with
alarming situation commercial real estate (office segment) crisis

Delinquencies Rate - Commercial Banks Delinquencies Rate - Small Banks

Credit card loans Consumer Loans

Consumer Loans Credit Card Loans

7.0 8.00
7.5

7.00
6.0

6.00
5.0

5.00
4.0

3.0
%

4.00

%
3.0
3.00 2.9

2.0 2.5
2.00

1.0
1.00

0.0 0.00

3Q10

3Q12

3Q16

3Q21
3Q01

3Q13

3Q15

3Q17
3Q11

3Q14

3Q18
3Q19
3Q02

3Q04
3Q03

3Q05
3Q06
3Q07

3Q20

3Q22
3Q08
3Q09

3Q23
3Q15

3Q17

3Q19
3Q10
3Q11
3Q12

3Q14
3Q13

3Q16

3Q18

3Q23
3Q03

3Q05

3Q07

3Q09

3Q20
3Q21
3Q22
3Q01
3Q02

3Q04

3Q06

3Q08

Source: Bloomberg, Spark PWM

Private & Confidential 8
US Banking-Corporate Sector: Stress is Visible Although at Early Stage

Bankruptcy filings have been going up but not an alarming level Avg. interest rate paid by small business firm has come off a little but still at a high level

Bankruptcies Interest Rate

11
17,051

15,724
10
14,467
13,481
13,160 13,125 9
12,748 9.1

%
6

Aug-20
Jun-19

Oct-19

Aug-22

Aug-23
2Q22

Oct-18

Aug-21
Feb-19

Oct-23
Apr-19

Feb-20

Oct-20

Feb-21

Oct-21

Feb-22

Oct-22
Dec-18

Dec-19

Dec-22
Feb-23

Jun-23
2Q23

Aug-19

Apr-20
Jun-20

Dec-20

Apr-21
Jun-21

Dec-21

Apr-22
Jun-22

Apr-23
3Q22

4Q22

3Q23
1Q23
1Q22

Source: Bloomberg, Spark PWM

Private & Confidential 9
US has been Adding about $ 100bn in Debts Every 8 Days (Debt to GDP at 121%)

Interest expense is going up and Tax receipts are coming down Debt is at elevated level (121% of GDP), every 8 days $100bn of debt being added

Intt exp. Tax receipts $ Bn Increase in Debt Per day Debt Increase
1Q21 385 4
40.0% 2Q21 397 4
30.0% 30.2% 3Q21 (101) (1)
20.0% 4Q21 1,188 13
1Q22 784 9
10.0% 2Q22 168 2
0.0% 3Q22 360 4
-10.0% 4Q22 491 5
-10.8% 1Q23 39 0
-20.0% 2Q23 874 10
3Q21

2Q23
2Q20

2Q21

2Q22
4Q21
3Q20

4Q20

3Q22

4Q22

1Q23

3Q23
1Q20

1Q21

1Q22
3Q23 838 9
22-Nov-23 616 12

Fed has been on a QT at a time when deficits have been rising, pushing the yields higher 10 Year Yield came off from 5.0% level to 4.4% owing to slowdown in the economy

Fed Bank Total Assets US 10 Yr Bond Yield

9.0 8.7 6.0
5.0
8.5
4.0
7.8 4.4
$ Tn

8.0 3.0

%
2.0
7.5
1.0
7.0 0.0

Nov-13

Nov-15

Nov-17

Nov-19
Nov-11

Nov-21

Nov-23
Nov-01

Nov-03

Nov-05

Nov-07

Nov-09
Aug-23
Aug-23
Nov-22
Nov-22
Oct-22

Jan-23
Jan-23

Nov-23
Feb-23
Feb-23

May-23
May-23
May-23

Oct-23
Oct-23
Oct-23
Jun-23
Jun-23
Dec-22
Dec-22

Mar-23
Mar-23
Apr-23
Apr-23

Sep-23
Jul-23
Jul-23

Sep-23

Takeaway : US has been adding about $ 100bn in Debts every 8 days vs 4 days till first month of the 4th quarter. Situation has improved lately in November month. However, given the fact that interest
payments has been outpacing the tax receipts, the debt will increase faster.( Debt to GDP ratio 2022: 121%). Fed has been on a QT at a time when deficits have been rising which has been pushing the
long-term yields higher. Although the street is expecting rate cut to start from Jun-24, we are of the view either the fed will blink, or we will have a hard landing into recession in CY2024.

Source: Bloomberg, Spark PWM

Private & Confidential 10
Drop in Bond Yield in Anticipation of Slowdown in Economy, Leading to Rally in Equities

S&P 500 earnings to grow at a CAGR of 10.3% Slowdown effect: Yields down, Equities higher

EPS RHS ($) PE 10 Yr Avg PE S&P 500 10 year yield

300 25.0 4,600 5.0

269.2
4,508.2
243.5 4.9
250 4,500
20.4 20.0
221.3

18.5 4.8
200 16.8 4,400

15.0
4.7

150 4,300

%
4.6
10.0

100 4,200
4.5

5.0
50 4,100
4.4
4.4

0 0.0 4,000 4.3

2023E

2024E

2025E

12-Nov
29-Oct

16-Nov
08-Nov

10-Nov
25-Oct

27-Oct

31-Oct

02-Nov

06-Nov

14-Nov
23-Oct

04-Nov
Source: Bloomberg, Spark PWM
Private & Confidential 11
Euro Zone Economy: Summary

Eurozone economy losing momentum Eurozone GDP came in at meagre +0.1% in 3Q23, negatively surprised the
street. While, the economic activity continues to lose momentum as the composite PMI data came in at 46.5 for the
October month. GDP growth estimate has been lowered further to 0.6% in 2023 vs 0.8% previously and 1.2% in
2024 vs previous forecasts of 1.3%

Germany continues to be biggest drag : Germany continues to be the biggest drag in Eurozone as its energy-
intensive heavy industries rely on external demand for growth.

Inflation continue to moderate Headline inflation fell to 2.9% in October 23 down from 4.3% in September month.
Inflation slowed down to its lowest level in more than two years on the back of fall in energy prices.

Rate hike cycle near the end The ECB raised its key interest rate to a record high of 4% in mid-September meeting
but signalled that this is probably the last hike.

Moderating inflation supports the ECB view on the Interest rates Inflation is expected to come down slowly
towards 2% (ECB target inflation) over the next two years. Even if inflation accelerates again in the interim period,
another interest rate increase may not be required as the policy makers believe that if the rates are kept at the
present level for a longer period, it will take them to the 2% medium-term inflation target.

Private & Confidential 12

Euro Zone: Continues to Falter but Rate Hike Cycle is Likely Over

Eurozone economy continues to lose momentum GDP estimate has been lowered PMI continues in the contraction zone (below 50)

Real GDP GDP Growth Rate Euro Area Composite PMI

6 6.0
59
4.0 57
% YoY

4 1.6
1.2 55
2.0 0.6
53
2 0.8 0.0

%
51
0.6
49
0.1 -2.0 46.5
0 47
1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23
-4.0 45

Aug-22

Aug-23
Feb-22

Oct-23
Oct-22

Feb-23

Jun-23
Apr-22

Jun-22

Dec-22

Apr-23
Real GDP (yoy%) Previous estimate for FY23
-6.0
Revised estimate for FY23 2019 2020 2021 2022 2023E 2024E 2025E

While labour markets remain steady Policy Rate maintained at current levels Inflation expected to moderate to 2% level by 2025e

Unemployment Rate Policy Rate CPI

9.0 5.0 4.5 10.0
4.5
8.5 4.0 8.0
8.0 3.5 6.0
3.0
7.5 2.5 4.0
%

%
2.1
2.0
7.0 1.5 2.0
6.5
6.5 1.0 0.0
0.5
6.0 0.0 -2.0

Aug-23
Aug-22
Feb-22

Oct-22

Feb-23

Oct-23

2023E
Mar-20
Jun-20

Dec-20
Mar-21
Jun-21

Mar-22
Jun-22

Dec-22
Mar-23
Jun-23

Apr-22

Jun-22

Dec-22

Apr-23

Jun-23
Sep-20

Sep-21
Dec-21

Sep-22

Sep-23

2019

2025E
2020

2021

2022

2024E
Source: Bloomberg, Spark PWM
Private & Confidential 13
China Economy: Summary

Economic data offers mixed picture of Chinese economy: Official data offers a mixed picture of Chinese economy.
On one hand, Industrial production and retail sales grew more than the forecast. While on the other hand, fixed
asset investment growth came below estimates. Bank loan too contracted from the September month level.

Deflationary situation continues : Deflationary scenario continued in the October month as headline inflation fell by
-0.2% YoY.

Need of the hour is fiscal stimulus: Despite the government's monetary stimulus measures, we believe that the
need of the hour is a fiscal stimulus.

Talks of sizeable fiscal stimulus is still on the cards: There are talks of sizeable stimulus to revive the economy
from Deflationary pressure. If this turns out to be true, it can provide strong tailwind to the economy. In all
likelihood, it will be able to come out of the deflationary pressure.

Compelling valuation but deflationary scenario is a spoiler: Optically Chinese stocks appear attractive at <10 P/E
Multiple & < 1x P/BV multiple. However, it is very difficult to project earnings in a deflationary scenario. Impact of
price cut of products/services on Earnings can be very severe and it is a futile attempt to look at earnings in that
background.

Private & Confidential 14

China: October Data Offers a Mixed Picture, Deflationary Pressure Persists

Retail Sales continues to improve in October Composite PMI contracted in October

Retail sales Composite PMI

20 60
15
10 7.6 55
50.7
5
YoY %

50
0
-5
45
-10
-15 40

Aug-23
Aug-22

Nov-22
Mar-22

May-22

Oct-22

Jan-23

Feb-23
Apr-22

Jun-22

May-23

Oct-23
Dec-22

Jun-23
Jul-22

Mar-23

Apr-23
Sep-22

Jul-23

Sep-23

Jun-23

Aug-23

Oct-23
Jan-23

Feb-23

May-23
Dec-22

Mar-23

Apr-23

Jul-23

Sep-23
3Q GDP fell to 4.9% Deflationary pressure still persists

Real GDP Headline Inflation

7
4
6
3
5 4.9

YoY %
2
YoY %

4
1
3 0 -0.2
2 -1
2Q23
4Q23

3Q23
1Q23

Feb-22

Nov-22
Aug-22

Aug-23
Apr-23
Jan-22

Oct-22

Feb-23

Oct-23
Jun-22

Jan-23

May-23
May-22

Mar-23

Jun-23
Mar-22

Apr-22

Jul-22

Dec-22
Sep-22

Jul-23

Sep-23
Source: Bloomberg, Spark PWM,
Private & Confidential 15
India Macro: In a Bright Spot
India Economy: Summary

India continues to fare well on Internal as well as External front :

▪ Fiscal Deficit target within reach The growth in receipts (19% YoY in 1H24) continue to outpace growth in expenditure (16% YoY in 1H24). As a result,
the fiscal deficit run rate is ~40% of the Budgeted estimates in the 1H24. We believe Govt. could comfortably meet the fiscal deficit target of 5.9% of
the GDP in FY24E. Govt. continue to peddle on Capex expenditure to spur growth as it rose by (+43% YoY in 1H24).

▪ Manageable CAD As far as external front is concerned, BOP is expected to remain stable despite looming concerns of rise in oil prices as services
exports remain resilient. Our Scenario analysis seems to suggest that even if crude remains at 80$, the current account deficit will be about 1.6% of
GDP, improvement from FY23 level of 2%. However, the trade deficit zoomed to $31.5bn in October vs run rate of $ 19-20 bn led by Oil and Gold imports.
In our view, festival demand and price effect may have attributed to this increase. Given the Global slowdown average commodity prices (Crude ~80$ a
Barrell) are likely to stay lower helping trade deficit situation to improve from November onwards.

▪ Lead indicators suggest economic activity remains strong in October: Lead indicators PMI and E-way bill generation seems to suggest strong
economic activity in the October month. GST Collection for October grew by 13.3% YoY vs 11.1% average growth for previous 6 months signaling strong
economic activity in October. Inflation number for October further moderated to 5.02%, much below the RBI forecast for FY24e (average 5.4%). We
estimate India’s GDP to grow at >6% in FY24/FY25e .

▪ Credit growth (ex HDFC Ltd.) remains robust ~ 15% Credit growth remains robust in September at 15.3%. Services and Personal loans continue to
drive sector loan growth while Industry loan growth continue to be languishing at c.6%.

▪ 2Q24 earnings season has been strong : 2Q24 earnings season has been good. The sector on which we are over weights i.e. Power, Auto, Banks and
Infra saw earnings upgrade in 2Q24. While, maximum earnings downgrades were seen in Metals, Chemicals, Retail/FMCG and IT.

India continues to be in a bright spot: India continues to be in bright spot in both Advanced economies as well as Emerging markets. Stable macro and
rates put India in a bright spot vis a vis the advanced economies (US & Eurozone) and Emerging markets like China. However, the key takeaway coming out
from the recently concluded 5 state election highlight that Freebie politics could take centre stage in run up to the general election (May-2024) which
could potentially impact growth adversely over the medium term.

Private & Confidential 17

India: Govt. Finances Continue to be in Strong Shape in 1H24, Fiscal Deficit Target of
5.9% Looks Comfortably Achievable

Government finances (INR bn) continue to be in strong shape Direct tax collections jumped by 19% yoy as corporate tax grew 20% YoY

Government finances (INR Bn) Apr -Sep'22 Apr -Sep'23 Increase Corporate Tax Receipt
Total Expenditure 18,236 21,191 16% 500 451
450
▪ Revex 14,807 16,285 10% 375
400
▪ Capex 3,429 4,906 43% 350 309

000’Cr
300 249
Total Revenues 11,696 13,971 19% 244
250 208
187
▪ Tax Revenue 10,120 11,603 15% 200 150
150
▪ Non Tax Revenue 1,576 2,368 50%
100
Others 342 202 -41% 50
-
Fiscal Deficit 6,198 7,019 13% 6MFY17 6MFY18 6MFY19 6MFY20 6MFY21 6MFY22 6MFY23 6MFY24

Personal income tax grew by 31% YoY Government capex stood at all time high of INR 4.9trn (43% YoY growth)

Personal Income Tax Capex

491
500 452 500
450 450
400 345 400 343
350 350

000'Cr
000’Cr

300 274 300

250 213 250 229
196 188
200 168 166 200 163 166
144 135 146
150 150
100 100
50 50
- -
6MFY17 6MFY18 6MFY19 6MFY20 6MFY21 6MFY22 6MFY23 6MFY24 6MFY17 6MFY18 6MFY19 6MFY20 6MFY21 6MFY22 6MFY23 6MFY24

Source: Bloomberg, RBI, Spark PWM

Private & Confidential 18
India: Comfortable Current Account Deficit Even if Crude at 80$ a Barrell

Crude oil assumption Crude @ $79/bbl Crude @$94/bbl $60/bbl $70/bbl $80/bbl
CAD (US$ bn) FY22 FY23E FY24E FY24E FY24E
Total imports (a) 613 707 601 647 690
▪ Oil imports 162 209 142 167 192
▪ Gold imports 46 35 39 41 43
▪ Non-oil & non-gold imports 405 463 420 439 455
Total Exports (b) 422 464 406 429 457
▪ Oil exports 67 97 65 77 89
▪ Gems & Jewellery exports 39 39 36 37 39
▪ Non-oil & non-gold exports 316 328 305 315 329
Trade balance (b-a) = i -191 -242 -195 -218 -233

Invisibles (ii) 151 176 171 175 177

CAD (i+ii+iii) = a -39 -66 -26 -45 -58
CAD (% of GDP) -1.2 -2.0 -0.7 -1.2 -1.6

Capital account (US$ bn) FY22 FY23E FY24E FY24E FY24E

▪ Foreign Direct Investment 39 32 28 30 32
▪ Other Capital Account Receipts 9 -48 -15 -30 -42
Capital account (b) 86 51 39 45 49
Balance of Payment (a+b+c) 48 -16 13 0 -10
BOP (% of GDP) 1.5 -0.5 0.4 0.0 -0.3

Source: Bloomberg, RBI, Spark PWM

Private & Confidential 19
India: Lead Indicators Suggest Economic Activity Remains Strong in October

Composite PMI fell in Oct. but remains in an expansion zone IIP growth falls in Sep-23 from 14-month high in Aug Credit growth remains robust at 15.3%

Composite PMI Industrial Production Credit Growth

62 20.0 17.0
15.3
60 16.0
15.0 15.0
58
14.0

YoY %
10.0

YoY %
56 58.4 13.0
54 5.0 12.0
5.8 11.0
52
- 10.0
50 9.0
48 -5.0 8.0

Nov-22

Nov-21

Nov-22
May-22

Jan-23

Jan-23
May-23
Mar-22

Jan-22

May-22

May-23
Mar-22
Mar-23

Mar-23
Jul-22

Sep-22

Sep-23
Jul-23

Jul-22

Sep-22

Jul-23

Sep-23
Jun-22

Aug-22

Oct-22

Aug-23
Feb-23

Oct-23
Feb-22

Jun-23
Apr-22

Dec-22

Apr-23

CPI moderated to 4.87% in Oct, below the RBI est. of 5.4%

E-Way bills generation at all time high in October GST Collection for October grew by 13.3% YoY
for FY24e

CPI Combined E-way bills (Mn) GST Collection

8.0 103
2.00 1.72
100 1.80
7.0 1.60
80

Rs. Lakh cr.

1.40
YoY %

6.0 1.20
60
4.9 1.00
5.0 40 0.80
0.60
4.0 20 0.40
0.20
3.0 0 -
Nov-22

Nov-22
Aug-23

Aug-23
Apr-23

Apr-23
Oct-22

Feb-23

Oct-22
Jan-23

Mar-23

May-23

Oct-23

Feb-23

Oct-23
Jun-23

Jan-23

Mar-23

May-23
Jun-23
Dec-22

Dec-22

Sep-23
Sep-22

Jul-23

Sep-23

Sep-22

Jul-23
Aug-23
Aug-22
Feb-22

Oct-22

Feb-23

Oct-23
Apr-22

Jun-22

Dec-22

Apr-23

Jun-23

Source: Bloomberg, RBI, Spark PWM

Private & Confidential 20
 C ataly s ts & Sp eed Breakers: DIIs Remai n Buyers +
Govt Freebies And Unsecured C redit Raises C oncern
Catalysts: SIP Set New All Time High, DII Remains Resilient

Despite modest FPI inflows in the MTD India continues to be preferred destination among Though muted FIIs resumed net buying after a two-month selling, while DIIs displayed
major EM and remains positive on YTD basis. unwavering resilience and remained net buyers.
MTD YTD DII FII
13 12.2

11 47,148 46,618 12,262

7,936 43,838
36,239 11,119 4,687
9 21,353 20,764 25,501 20,843 19,912
1,688
6.8 6.8 7.0 1,688 12,825 11,631
-4,533 2,447 7,707 12,122
7 6.3 -4,533

INR Cr
-5,294
-14,768
$ Bn

-28,852 -24,548
5 3.9
2.9 2.5
3

Aug-23
Nov-22

Nov-23
Feb-23
Jan-23

May-23

Oct-23
Mar-23

Apr-23

Jun-23
Dec-22

Jul-23

Sep-23
1 0.1 0.3
-0.6
-1 -0.1
India China S. Korea Brazil Taiwan Malaysia

SIP flows touch an all time high of INR 169 bn in Oct-23

SIP - INR cr YoY

18,000 50.0%
16,928
40.0%
16,000

YoY %
INR Cr

30%
30.0%
14,000
20.0%

12,000
10.0%

10,000 0.0%
Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23

Source: Bloomberg, NSDL, Spark PWM

Private & Confidential 22
Catalysts: Anticipating a Santa Rally: Bells Set to Jingle in the Stock Market this Year

S&P 500 and Nifty 50 Index returns from 1st Nov to 31st Dec for last 27 years Positive trends and expectation of continued momentum

Returns ▪ Santa Rally Tradition: Historically, markets exhibit a rally from November to
Months
S&P 500 Nifty 50
Nov to Dec 2022 -0.4% 0.3% December, known as the Santa Rally.
Nov to Dec 2021 3.3% -3.2%
Nov to Dec 2020 13.5% 19.8% ▪ Festive Boost: Driven by the festive season and positive investor sentiments,
Nov to Dec 2019 5.3% 2.3%
Nov to Dec 2018 -8.5% 4.6% the Santa rally is supported by favourable macro indicators.
Nov to Dec 2017 3.7% 0.9%
Nov to Dec 2016 6.0% -5.1% ▪ Historical Performance: Over the past 27 years, the Nifty index rallied 18
Nov to Dec 2015 -2.9% -1.3%
Nov to Dec 2014 2.0% -0.5% times during this period, averaging a 8.9% return and, the S&P 500 index
Nov to Dec 2013 4.9% 0.0% experienced a rally 19 times with an average return of 5.7%.
Nov to Dec 2012 -0.1% 4.6%
Nov to Dec 2011 3.2% -12.1%
Nov to Dec 2010 6.2% 0.3% ▪ Current Macro Environment: This year, the Indian macro environment
Nov to Dec 2009 6.9% 14.0% appears favourable, marked by robust economic activities, strong H1FY24
Nov to Dec 2008 -6.5% -2.8%
Nov to Dec 2007 -2.7% 4.6% numbers, and government capex led growth, contributing to an overall
Nov to Dec 2006 3.7% 5.3% positive market sentiment.
Nov to Dec 2005 3.8% 18.8%
Nov to Dec 2004 7.2% 15.7%
Nov to Dec 2003 5.0% 17.4% ▪ Market Correction and Recovery: Following a correction from mid-
Nov to Dec 2002 -2.3% 14.9% September to October end, addressing geopolitical concerns in the Indian
Nov to Dec 2001 5.9% 6.5%
Nov to Dec 2000 -7.1% 5.2% markets, there has been a resurgence in momentum starting from November.
Nov to Dec 1999 8.5% 16.6%
Nov to Dec 1998 10.6% 7.4% ▪ Anticipation for Continued Rally: We expect a continuation of this rally,
Nov to Dec 1997 3.3% -0.4%
Nov to Dec 1996 5.3% -0.8% unless faced with any major obstacles.

Source: Bloomberg, Spark PWM

Private & Confidential 23
Speedbreaker: Freebie Politics Can Have –Ve Impact on India’s Growth Story

Two of the leading parties have dolled out freebies in the recently concluded 5 states poll.

One of the major party has jumped into the fray and trying to match up freebies without loan waivers and free
electricity. However, it has also announced the extension of food subsidy by 5 years which is going to cost about Rs
150-200 bn per year.

Freebies can become a burden on the govt finances over time. Empirically, it is very difficult to reverse any freebies
even though there is a change in the govt. Freebies can create a dependency syndrome amongst the recipients ,
who may expect more freebies in the future and become less motivated to work hard or pay taxes.

On the other hand, Welfare schemes are well thought after plans that aim to benefit the target population and
improve their standard of living and access to resources. Welfare schemes tend to have a positive impact on the
recipients while freebies can create dependency or distortions.

A LatAm country is a prime example of how Freebies can kill a state which has high natural resources and a
prosperous country.

Running up to the General election, we may get to see a ramp up in Freebies which can potentially act as speed
breaker to India’s growth story.

Source: Spark PWM

Private & Confidential 24
Speedbreaker: RBI Tightens Credit Strings, Implements Measures to Moderate
Credit Expansion

Personal loan portfolio of the banking system (Rs tn) Credit card portfolio trend (Rs tn)) Regulatory measures towards consumer
credit and bank credit to NBFCs
Personal loan Credit Card Loan
▪ Risk weights for consumer credit
15 13.4 2.5 2.2 exposure of commercial banks
12.1 1.9
2.0 (excluding housing, education, vehicle
9.6 1.5
10 7.9 8.4 1.3
loans, and gold-secured loans)
1.5 1.2
6.1 increased by 25% to 125%
5.1 0.9
1.0 0.7
5 ▪ Risk weights for consumer credit
0.5 exposure of NBFCs (excluding
0 0.0 housing, education, vehicle loans,
FY18 FY19 FY20 FY21 FY22 FY23 1HFY24 FY18 FY19 FY20 FY21 FY22 FY23 1HFY24 loans against gold, and
microfinance/SHG loans) increased
Incremental Cash Reserve Ratio (ICRR) has led to a temporary from 100% to 125%.
Bank lending to NBFCs have increased sharply in the past 18 months
reduction in liquidity within the banking system
200000 176,850.2 ▪ Credit card receivables' risk weights
Loan to NBFC increased by 25% to 150% for banks
14.2 100000 and 125% for NBFCs.
15 13.3
0 ▪ Risk weights for NBFC exposures of
9.6 9.5 10.2
10 Scheduled Commercial Banks

INR Cr.
(100000)
7 increased by 25%, excluding loans to
5 (200000) Housing Finance Companies (HFCs)
5
and loans to NBFCs eligible for
(300000)
classification as priority sector as per

Aug-23
Aug-23

Nov-23
Nov-22

Feb-23

Oct-23
Oct-23
Jan-23
Jan-23

May-23
May-23
Jun-23
Mar-23
Mar-23
Dec-22

Apr-23

Jul-23

Sep-23
0 existing instructions.
FY18 FY19 FY20 FY21 FY22 FY23 1HFY24

Key Take Away

▪ Banks Tier I Computation and RoE may take a hit with this measure.
▪ Banks loan growth may be hit adversely. The street was expecting Bank credit growth to be about 15% for FY24/25. With this measure being implemented, the credit growth for the system might be
restricted to 13-13.5%.
▪ In our view, the RBI is indirectly telling banks to slow unsecured loans and credit cards.

Source: Bloomberg, Spark PWM

*Negative figure is surplus liquidity; Positive figure is deficit Private & Confidential 25
I n d ia F ixe d I n come : Main t ain a Mix of Se l e ct Dur at ion
an d C r e d it I d e as
RBI Actions – Leading to Liquidity Tightening ; Cost of Borrowing to see Upward Pressure

Recent RBI Actions RBI raised risk weights for Unsecured Loans

▪ RBI’s open market sales drove rise in G-sec yields. While RBI kept Unsecured Loans as a % of Risk-Weighted Assets (RWA) assign risk
policy rates unchanged in October’s monetary policy, it surprised the Retail Credit through Banks
weights to diverse bank assets, reflecting
market by indicating open market sales of G-Secs to drain excess their risk levels. Calculated using these
liquidity. weights, RWA ensures banks maintain
2023 25.2%
sufficient capital to cover potential losses,
▪ Open market sales subsequently increased to INR 18,565 cr till Nov’23
promoting financial stability.
(INR 9,915 cr till Oct’23).

2021 22.9%

Impact
Impact
▪ RBI’s open market sales of G-Secs, credit growth staying higher than
2Yr CAGR of Unsecured The new risk weight limits could consume
deposit growth, as well as lower government spending, contributed to Retail Loans 35-100 bps more capital than the current
lower liquidity
24.8% level.

▪ The interbank call money rate stayed above the repo rate, averaging Given the already prevailing tight liquidity
6.7% (+6 bps MoM). conditions, Banks/NBFCs will need to
2Yr CAGR of Bank’s
resort to capital markets for borrowing
▪ Similar upticks were observed in Money Markets : 6-month CD (+21 bps Gross Advances
requirements in order to maintain capital
MoM) and 6-month CP (+17 bps MoM) 13.8% adequacy without hurting the business
momentum.

Source: Spark PWM, RBI

Private & Confidential 27
Yield Curve is Expected to Remain Flat as Liquidity remains Tight

Short-Term Long-Term
Tight Liquidity drives up supply of CD/CPs, thereby keeping short term rates high Healthy Demand in Maturity profiles of 10 Years and higher tenors

Liquidity Deficit keep Short Term Yields High

3Y 6.1%
LAF Absorption (INR

5Y 11.5%

7Y 9.2%
tn)

10 Y 22.9%
Sep'22
Oct'22

Dec'22
Jan'22
Feb'22
Mar'22
Apr'22
May'22

Feb'23

Apr'23
Aug'22

Jan'23

Aug'23
Mar'23

May'23
Jun'22

Jun'23

Sep'23
Oct'23
Jul'22

Jul'23
Nov'22

Nov'23
14 Y 15.3%

30 Y 12.2%

As Credit Offtake continues, Banks/NBFCs turn to debt markets for capital

40 Y 18.3%
Gross Credit YoY (%) CP Issuances (INR tn) CD Issuances (INR tn)
Agg Deposits (%) Avg Yield 50 Y 4.6%
6.96
6.87 6.87 6.87
6.74 6.74 6.74
▪ The Government’s auction of the first 50-year bond evoked a strong
1.5
1.1 1.2 1.2 1.2 demand from investors as the Reserve Bank of India (RBI) received bids
0.8 0.9 0.7 0.8 0.6 worth Rs 40,200 crore (4x) for these ultra-long bonds, against the notified
0.5 0.4 0.5
0.2
amount of Rs 10,000 crore.
Apr'23

Aug'23
May'23

Jun'23

Sep'23
Jul'23

Oct'23
Dec'21

Dec'22
Mar'22

Mar'23
Sep'22

Sep'23
Jun'22

Jun'23

▪ The sale of long-term bonds may help the government elongate the tenure
of debt sold and keep its interest costs under control.

Source: Spark PWM, RBI, Bloomberg

Private & Confidential 28
Yield Curve becomes Even More “Flatter” ; but OIS Indicates Interest Rate Peaking
Favorable demand dynamics in the longer tenor bonds coupled tight liquidity conditions keeping short term rates high

Sov Yield curve movements over time OIS curve across maturities

23-Nov-23 25-Oct-23 08-Jun-22 04-May-22 7.4

G-Sec (Spot)
8.0
7.5
7.4 7.2
7.5
7.34
7.0 7.3
7.0
6.5
31-Oct-23
6.0 6.8

5.5
6.6
5.0 Current
31-Mar-23
4.5
6.4
4.0

3.5 6.2
3M 6M 1Y 2Y 3Y 5Y 10Y 3M 6M 1Y 2Y 3Y 4Y 5Y 7Y 10Y

▪ OIS Curve eased over the month with lower swap rates, signaling a peak in the interest rate cycle.
▪ The OIS curve although is still pricing in yield easing in the longer ends, thereby indicating that while levels appear to have peaked, the
flatness is expected to persist

Source: Bloomberg, Spark PWM

Private & Confidential 29
We Re-iterate Our View - 3 Year Credit Papers (Predominantly in the “Below AAA” Rating
Band) Appear Attractive

Particulars/ Yields Spreads Rating Current Spread Last 10 Years Average Deviation

Spreads across
3 Year tenor
Yields as on 23-Nov-23 30-Apr-23 24-Oct-23 30-Apr-23
AAA 53 74 -21 bps
G-Sec Yields Term Spreads
1Y G-Sec 7.14 6.90 AA 116 118 -2 bps
3Y G-Sec 7.12 6.97 -2 6
A 312 271 41 bps
5Y G-Sec 7.26 7.00 14 3
10Y G-Sec 7.27 7.12 1 12
15Y G-Sec 7.36 7.19 9 7 Key Points:
30Y G-Sec 7.46 7.27 10 8 ▪ Corporate India has shown signs of strengthening which is evident in
Corp Bond Yields Credit Spreads the higher number of rating upgrades. On a sectoral basis,
1Y AAA 7.76 7.61 62 71 Manufacturing & Infra have stabilized however, BFSI shows upward
momentum
3Y AAA 7.83 7.56 71 60
5Y AAA 7.78 7.57 52 58 ▪ Financial institutions have witnessed a strong decline in NPAs. –
10Y AAA 7.79 7.65 52 53 Bank NPAs have fallen to a 10-year low of 3.9% as per RBI FSR
Report
1Y AA 8.34 8.24 120 134
3Y AA 8.47 8.24 135 128 ▪ Owing to rising short term rates, the term premium appears to have
5Y AA 8.43 8.25 117 125 eroded in our earlier recommendation of 3 years, however the
spreads is largely compensating for the term, thereby still meriting
10Y AA 8.44 8.34 117 122
an allocation
1Y A 10.33 10.18 319 328
▪ From a credit perspective, select papers in the “lower than AAA”
3Y A 10.29 9.98 317 301
appear to yield a favorable risk reward in the short-medium term
5Y A 10.19 9.94 293 294
horizon
10Y A 10.24 10.10 297 298

Source: Bloomberg, Spark PWM

Private & Confidential 30
Key Thoughts
01
Factors impacting yield curve
positively:
▪ Greater FIIs in Indian Bonds
riding on index inclusion
▪ Healthy tax receipts
▪ Fiscal Deficit declining
▪ Inflation easing
Headwinds:
▪ Global tightening
▪ Increasing Crude prices
▪ Continued deficit liquidity
▪ Sustained Credit offtake
amid tight liquidity
The market seems to believe
that policy rate hike cycle has
peaked out
02
▪ Risk in credit exposure has
reduced on account of
improving balance sheets for
Corporate India.
▪ Credit spreads are at average
levels over G-Sec.
▪ High Quality Credit should
be used to enhance the
overall yield of the portfolio.
03 04
▪ Monetary policies are Investment Approach:
expected to maintain
▪ Liquidity Bucket (<1Y) – Ideas
pressure on interest rates
targeting money market +
this fiscal.
returns.
▪ While RBI is expected to
▪ Hold-to-Maturity Bucket (1-
keep the repo rate
3Y) – High quality bonds and
unchanged, it can use its
select high yield instruments
liquidity management tools
offering an opportunity to
to improve the transmission
capture attractive yields
of past rate hikes to bank
deposit and lending rates. ▪ Duration management
Bucket through roll down
▪ Its recent move to increase
strategies (4-5Y) – As
risk weightage for banks on
steepness creeps in over
credit to consumers and
time - opportunity to earn
non-banking financial
cap gains along with
companies could also slow
accruals
the pace of credit offtake.
▪ Yield Enhancer Bucket (>5Y)
– Select high yielding
structured credit fund.
Private & Confidential 31
Debt Portfolio Construction

Tenor Allocation Theme Strategy Category Product Name Indicative Yield

Arbitrage MF Invesco India Arbitrage Fund 6.25%-7.50%

Upto 12 Short term Corporate Bond Shriram Finance Limited - Secured (CRISIL AA+) April 2024 8.75%
25% Liquidity
Months ideas Liquid Plus Northern Arc Money Market Alpha Fund 9.10%*

High Quality PTC Veritas Finance PTC (CRISIL AAA - SO) 8M 8.75%

Corporate FDs Bajaj Finance FD [CRISIL FAAA] 3Y 7.75%

High Quality NCD HDB Financial Services – Avg Maturity 18M - [ICRA AAA] 8.07%

Investment Grade AT-1 Bond Punjab National Bank Perp – Call Date 13th Feb 2025 [ CARE AA+] 8.30%
High
12-36 Hold to
35% Quality Equity Linked MLD Nuvama 27 M [AA-] – All Weather Equity; Max IRR 13.00% (@ 120% Final Level) 13.00%
Months Maturity
Credit
Cholamandalam NCD Public Issue (2-3 Years) [ICRA AA] 8.50%

Curated Debt deals Spandana Sphoorty Ltd. 34M NCD [CRISIL A] 11.00%

KrazyBee NCD – 13 Months [CRISIL A-] 10.75%

Active Medium Duration HDFC Medium Term Debt Fund 7.80% - 7.90%
Hold to
Investment Grade Tata Capital - Dec 2026 - [CRISIL AAA] 8.00%
Maturity
36-60 Duration
25% Gilt Fund Edelweiss CRISIL IBX 50:50 Gilt Plus SDL Sep 2028 Index Fund 7.20% - 7.30%
Months Strategies
Passive -
Corporate Bond Fund Kotak Nifty SDL Apr 2027 Top 12 Equal Weight Index Fund 7.30%-7.40%
Roll Down
Tax Free Bond PFC Tax Free Bond 41M [AAA] 5.17%

>60 High Yield Yield Credit AIF ICICI Prudential Corporate Credit Opportunities Fund II 12.50%*
15%
Months Strategies Enhancer Credit AIF SpECs Fund II 13.50%*

*Indicative yields of funds is post expense

Source: Spark PWM Private & Confidential 32
Indi a Equi ti es: Fairly Valued; Strong Growth in
2QFY24 Earnings
Earnings Scorecard: 2Q24 Earnings Season has been Good; Maximum Cuts were seen in
Metals, Chemicals, Retail/FMCG and IT
Changes in Earnings estimates

Sector FY24e FY25e Sector FY24e FY25e

Steel Pipes 10.7% 0.6% Engineering & CG -0.1% -0.7%
Paper 7.6% -4.3% Textiles -0.3% -0.4%
Capital Market 7.1% 7.9% Media & Entt. -1.5% -2.4%
Paints 6.7% 2.9% Auto Ancillaries -1.5% -4.0%
Oil & Gas 6.5% 3.6%
Cement -1.6% -1.3%
Power Utilities 5.8% 7.5%
Building Products -1.7% -2.2%
Shipping 5.8% 36.3%
IT -3.3% -3.9%
Internet 5.1% 4.4%
Business Services -4.1% -1.1%
AMC 4.8% 0.5%
Consumer Durable -6.6% -3.1%
Sugar 4.4% 2.4%
Luggage -7.3% -0.5%
Auto 4.2% 2.9%
Retail -8.4% -5.5%
Bank 3.8% -1.0%
Agrochem -15.3% -16.9%
NBFC 3.7% 4.7%
Insurance 2.5% 6.5% Fertilizers -18.1% -14.6%

Alcoholic beverages 2.4% 3.7% Chemicals -21.5% -16.8%

Pharmaceuticals 1.3% 1.8% Metals -31.5% -10.0%

FMCG 0.9% 0.2% Teleco -33.2% -7.8%

Source: Bloomberg, Spark PWM

Private & Confidential 34
2QFY24 Results – Margins Rebound, While Topline Growth Remains Tepid

The margin erosion of FY23 is gradually improving, aided by lower commodity prices

Nifty 50 Nifty 500

Net Sales Growth EBITDA Growth Net Sales Growth EBITDA Growth

33.6% 34.1% 38.4%

37.7%
31.7%
33.7%
28.5%
27.5% 27.8%
26.7%

27.6%
22.6% 25.7%
22.2% 22.3%
21.5% 24.2%
22.9%
22.7%
18.5%
17.6%
16.2% 18.5% 18.5%
17.9%
14.1% 16.1%

12.1% 13.3%
12.9%
10.9%
9.0%
7.3% 8.4%
6.9%

3.7%

Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24 Q2FY24 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24 Q2FY24

Source: Bloomberg, Spark PWM

Private & Confidential 35
2QFY24 Results – Profit Cycle Largely Driven By Domestic Cyclicals and Commodities

Earnings growth largely driven by Oil and Gas, Real Estate, Auto and Cement

BSE 500 EBITDA growth (% YoY)

132.5%

83.4%

59.2% 63.1%
52.8%
46.8%
40.1%
29.8% 29.9%
16.0% 16.6% 19.7%
12.6% 13.5%
4.0% 6.4%

-20.9%
-34.6%
IT Services

Real Estate

Oil & Gas

Financial Services

Diversified

Pharmaceuticals

Cement
Banks

Auto & Auto Ancillaries

Transportation
Chemicals & Fertilizers

Power
Construction & Infrastructure

Metals & Mining

Telecommunications

Consumer Goods
Media & Entertainment

Engineering & Capital Goods

Source: Bloomberg, Spark PWM

Private & Confidential 36
2QFY24 Results – Nifty Earnings Remains in Line with Expectations

Inspite of earnings recovery, Nifty Consensus EPS remains largely remains stable

Nifty 50 Consensus EPS Nifty 500 Consensus EPS

FY2024E FY2025E FY2024E FY2025E

1,150 1,450 1,410 1,409 1,404

1,098
1,100 1,066 1,400
1,350
1,050
1,300
1,000 962
947 1,2501,214 1,213
1,194
950 925
1,200
900 1,150
850 1,100
Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23

BFSI, O&G and Auto to drive earnings for the Nifty from FY23-FY25E

Nifty free float PAT (INR bn) Percentage Contribution to Nifty PAT

34.0
5,029
4,394

%
3,706 14.0 13.0
8.0 7.0 5.0 5.0 4.0 2.0 2.0 2.0 1.0 1.0 - - -

Transportation
Metals & Mining

Power
IT Services
Auto & Auto

Cement

Pharmaceuticals

Chemicals &
Financial

Diversified
Banks

Construction &
Telecommunicat
Oil & Gas

Consumer

Others
Services

Infrastructure
Ancillaries

Fertilizers
Goods

ions
FY23 FY24E FY25E

Source: Bloomberg, Spark PWM

Private & Confidential 37
Valuations: Continued Safety Cushion in Large Cap

Nifty 1yr fwd PE @ 20.3X Nifty Mid-Cap 1yr fwd PE @ 30.5X NSE Small-Cap 1yr fwd PE @ 22.4X

45.0 32.0
27.0
40.0
25.0 27.0
35.0
23.0 30.5 22.4
20.3 22.0
30.0
21.0 18.9

19.4 25.0
19.0 24.9 17.0

17.0 20.0
12.0
15.0 15.0

13.0 10.0 7.0

Nov-16

May-21
Nov-21

Nov-16

May-21
Nov-21

May-21

Nov-21
Nov-15

Nov-17

Nov-18

Nov-19

Nov-20

Nov-15

May-17
Nov-17

Nov-18

Nov-19

Nov-18

Nov-19
May-17

May-19

Nov-22

May-19

Nov-20

Nov-22

Nov-20

Nov-22
May-18

May-20

Nov-23

Nov-23

May-19

Nov-23
May-16

May-22

May-23

May-16

May-18

May-20

May-22

May-23

May-20

May-22

May-23
Indices Nifty Nifty Midcap 100 Nifty Smallcap 100
P/B (12 months fwd) 2.8 3.1 2.5
P/B (10 yr average) 2.6 2.3 2.1
Price /Sales 2.5 2.1 1.9
RoE (%) 14.5 11.8 15.3
Dividend Yield (%) 1.4 1.1 1.1
Estimated EPS growth FY24 14% 20% 25%

Source: Bloomberg, Spark PWM

Private & Confidential 38
Outperformance Ahead: Auto, Banking, Infra, and Utilities Lead Growth
Auto
▪ By 2030, India's automotive industry may secure the third
position globally.
▪ The primary drivers are-
− substantial volumes supported by high demand.
− Passenger Car market is expected to reach 6 million units
till FY2030.
− Rising middle-class income and a huge youth population.
We maintain a positive stance on the sector.
Infra
▪ To achieve its 2025 economic growth target of US$ 5 trillion,
India must improve its infrastructure
▪ Central government capex up 35% YoY in 5MCY23.
▪ State governments' capex increased by 29% YoY in 4MCY23.
▪ Private sector sees record-high corporate capex
announcements in FY23, attracted by government
infrastructure budget allocations and strong balance sheets.
We participate in this growth through a proxy play - cement and
building material sector.
Source: Bloomberg, Spark PWM
Banks & NBFC*
▪ PAT CAGR for FY23-26E is expected to be 16%. Earnings are
expected to be driven by-
− Robust credit expansion resulting from increased private
capital expenditure and personal borrowing.
− Strong balance sheets, diversified portfolios, cleaned-up
NPAs has resulted in improved credit quality.
Our outlook for the sector remains optimistic.
Utilities
▪ India is the 3rd largest producer and consumer of electricity
worldwide. Consumption in India in FY23 logged a 9.5%
growth to 1,503.65 billion units (BU).
▪ Few drivers for power demand will be-
− Economic growth & Urbanization
− Growing population along with increasing electrification
and per-capita usage
▪ Significant government support from schemes like DDUGJY,
UDAY & RDSS, helps this industry reap the rewards of policy-
driven initiatives.
Our outlook for the sector remains optimistic.
Private & Confidential 39
Key Thoughts
01
In Q2FY24, there has been a notable
improvement in corporate profit growth,
whereas sales growth has been more
modest.
A correction in commodity prices and the
resulting decline in input costs for
companies has contributed to the uptick
in profits.
NIFTY 50 remains fairly valued at 12m
forward PE. The risk-reward ratio remains
in favour of the large-cap index.
We believe portfolio construction should
be largely based on Earnings growth.
02
Medium term (Earnings Led) Investment
Themes for the 3-5 years:
▪ Banks: Strong Balance sheet of Banks,
Corporate and Households led credit
growth aided by robust assets quality
will drive strong earnings growth
ahead.
▪ Auto:Sector witnessed strong growth
in both sales and profits in Q2FY24.
Outlook for H2 is positive on the back
of a gradual decline in inflation, festive
demand, seasonality, improved
supplies and new launches.
▪ Infra : Central and State governments’
thrust on CAPEX.
03
Risk to Medium term calls
▪ Banks: Post regulatory measures by
RBI, there is a risk that Tier 1 ratio may
decline; however, most banks are
expected to remain comfortably above
the threshold of 9.5%.
▪ Infra: Stretched working capital cycle
and lower CAPEX commercialization
▪ Auto: Inability to pass commodity
inflation without demand destruction.
Weakness in rural demand manifested
in lower sales volumes of two-
wheelers and tractor sales
Private & Confidential 40
Equity Portfolio Positioning

Investment
Bucket Allocation Theme Products
Management

Passives All Seasons - Actives of Passives

Tata Small Cap Fund
HDFC BAF
ICICI BAF
Decadal Themes with
focus on consistent Parag Parikh Flexi Cap Fund
Core Portfolio 55-60%
earnings growth and Actives SBI Magnum Midcap Fund
valuations
Buoyant Opportunities
Spark@75 Core and Satellite
ICICI Pru PIPE
Spark LIFE

Sector Rotation & Mean Nippon India Banking & Financial Services Fund
Reversion Mirae Asset Nifty Manufacturing Index ETF/FOF
Satellite Portfolio 25-30% Actives
Nuvama 27 M [AA-] – All Weather Equity; Max IRR 13.00% (@ 120%
Equity Linked MLD
Final Level) (Indicative Yield 13%)
Unlisted NSE
Deals SpAN
Alternatives 10-15% Actives
Early Stage tech Arkam Fund II
focused funds Arali Ventures Fund II

Source: Spark PWM

Private & Confidential 41
A s s et A llocati on: EW Indi a Equi ti es &
India Fixed Income
Spark PWM Asset Allocation Stance

India Equities Earnings Outlook

▪ We estimate that NIFTY 50 will deliver earnings CAGR of 11.1% over FY23-26E
▪ On a sectoral basis, we are OW on Banks, Auto and Infra (through Cement, Building Materials) and UW on Consumer
Discretionary
− We have moved from UW to EW on IT as we believe the US regional bank crisis is largely factored in at current price
levels

India Fixed Income Outlook

▪ We estimate 7.7% return over FY23-25E on the portfolio consisting of high-quality credit and duration
▪ As we continue to monitor central bankers’ stance on interest rates, the near-term inflation trend may lead to a
prolonged pause in the rate cut action and expect credit upgrade to downgrade ration to remain stable

India Asset Class Allocation

▪ We maintain an EW stance on India equities and India fixed income on a risk-adjusted basis and we rebalance the
corridor towards neutral stance

India Overall Return Expectations

▪ India to provide 12.1% CAGR over next two years based on the risk-profile based asset allocation

Source: Spark PWM

Private & Confidential 43
Expected Return And Asset Allocation

Nifty 50 Return Expectations Debt Return Expectations

Nifty EPS
13.0% 13.0%
1,131
1,066

925
825

11.1% 9.6% 9.6%

EPS CAGR 8.4% 8.4%

FY23-26E 7.6% 7.6%

FY23 FY24e FY25e FY26e

+ =
Upside = 12.1%
Entry at 19,802 Exit at 22x
@ 21.4x FY24 P/E FY26 P/E
CAGR over next Short term ideas High Quality Credit Duration Strategies High Yield Strategies

2 yrs Year 1 Year 2

Source: Bloomberg, Spark PWM

Private & Confidential 44
Risk Profile-wise Standard Asset Allocation

Policy Scenarios

Strategic Asset Allocation OW on Equities OW on Fixed Income

Corridor
Fixed (+/-) Fixed Fixed
Equity Equity Equity
RISK PROFILES Income Income Income

Aggressive 75% 25% 10% 85% 15% 65% 35%

Balanced 60% 40% 10% 70% 30% 50% 50%

Conservative 25% 75% 10% 35% 65% 15% 85%

Source: Spark PWM

Private & Confidential 45
Appendix
Debt (1/2)

Time Horizon Tax Asset Category Product Overview

Fund invests in debt and money market securities with maturity of up to 91 days only. The fund has the highest AUM in this
Debt Liquid SBI Liquid Fund-Reg(G)
category and a track record of 16+ years since inception

Among the best performers, 75% of the corpus is deployed in arbitrage positions. The debt allocation of the fund is majorly
Equity Arbitrage Fund Invesco India Arbitrage Fund(G)
tilted towards high-quality mutual funds having an average maturity of 1 year or less

Equity Arbitrage Fund Bandhan Arbitrage Fund(G) 71% of the corpus deployed in arbitrage positions; Debt allocation of the fund is tilted towards SOV and AAA rated instruments

< 12 month Debt Ultra Short Duration HDFC Ultra Short-Term Fund Fund has the highest AUM in this category, and 100% of the allocation is towards AAA & Above rated papers
Investment
Fund has among the lowest exposure (~6%) to AA rated instruments and one of the highest AUM in the category, with 26%
Debt Low Duration ICICI Pru Savings Fund
exposure towards G-Secs

Debt Money Market HDFC Money Market Fund Fund invests in instruments with a maturity of less than 1 year. 79% of the fund is deployed in AAA, and 15% is in G-Secs

Fund aims to deliver higher returns as compared to liquid funds by investing ~80% of the portfolio in high yield short term
Northern Arc Money Market
Debt Credit** invest-ment opportunities. The average duration is ~3-9 months and the fund manager has employed a robust risk monitoring
Alpha Fund
process

Fund invests in Debt & Money Market instruments with Macaulay duration of the portfolio between 1 year - 3 years. The fund has
Debt Short Duration HDFC Short Term Debt Fund(G)
among the highest YTM at 7.7% compared to its peers, with ~18% allocation in AA & the rest of the allocation in AAA & SOV

Fund invests in Debt & Money Market instruments with Macaulay duration of the portfolio between 1 year - 3 years. Fund has one
Debt Short Duration Nippon India Short Term Fund(G)
of the highest YTM at 7.6% and modified duration (2.5 years) in the category, with an allocation of ~5% towards AA

HDFC Medium Term Debt Fund will investment in Debt & Money Market instruments with Macaulay duration of portfolio between 3 years - 4 years. The
Debt Medium Duration
Fund(G) fund has YTM of 7.9% while having an allocation of 20% towards instruments with maturity of more than 7 years
12 to 36 months
investment
SBI Magnum Medium Duration Fund will investment in Debt & Money Market instruments with Macaulay duration of portfolio between 3 years - 4 years. The
Debt Medium Duration
Fund-Reg(G) fund has YTM of 7.9% and has an allocation of ~35% towards AA rated securities.

ICICI Pru Banking & PSU Debt Fund will invest minimum 80% in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions and
Debt Banking and PSU Fund
Fund(G) Municipal Bonds. One of the highest AUM in the category and a YTM of 7.7%. The fund has also shown a consistent track record

Nippon India Banking & PSU Debt Fund will invest minimum 80% in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions and
Debt Banking and PSU Fund
Fund(G) Municipal Bonds. Fund has 82% allocation towards AAA rated instruments and 12% towards SOV

Note - Bold indicates focus products from the preferred list of products based on current market outlook
*Product is available on PMS Platform; **Product is available on AIF Platform Private & Confidential 47
Source: Spark PWM
Debt (2/2)

Time Horizon Tax Asset Category Product Overview

Debt Medium to Long Duration Nippon India Income Fund Fund has a modified duration of ~4.3 years, with 56% allocation towards sovereign instruments
Fund will invest minimum 80% investment in corporate bonds only in AA+ and above rated corporate bonds. The fund follows a
roll-down strategy of investing in 3-year maturity papers. The fund is going to implement the next roll-down strategy in Mar’24
Debt Corporate Bond Bandhan Corp Bond Fund-Reg(G) by buying paper with a maturity of 3 years. Considering this, we feel that, in the current scenario, it is a very good opportunity to
ride the expected volatility over the next few months while accruing interest like a 5-year bond. Investors can also take the
advantage of falling rates next year.
Fund will invest minimum 80% investment in corporate bonds only in AA+ and above rated corporate bonds. Mr. Anupam Joshi
has been debt fund manager since 2009 and is managing the fund since 2015. Fund follows a ladder approach with 34%
Debt Corporate Bond HDFC Corp Bond Fund(G)
allocated to <3 years, 43% to 3-7 years, and 24% to >7 years maturity instruments. It has a mod duration of 2.7 years and
focuses on AAA and above rated papers.
Debt Corporate Bond SBI Corp Bond Fund Fund is actively managed on duration, credit, and term spreads.

Kotak Nifty SDL Apr 2027 Top 12

Debt Corporate Bond Fund follows passive roll down strategy maturing in April 2027; 100% SDL portfolio
Equal Weight Index Fund

The fund follows a roll-down strategy of investing in bonds maturing in 2030. With the average maturity reducing to 5 years over
Debt Dynamic Bond Axis Dynamic Bond Fund-Reg(G) the next 12 months, the fund can give good returns if interest rates start the downward trajectory. It has approximately 37%
> 36 Months allocated to SOV, and 60% towards AAA-rated papers

Debt Dynamic Bond Bandhan Dynamic Bond Fund 100% G-sec / AAA strategy takes active duration calls across the curve

Credit allocation will be limited to only AAA-rated instruments. Active calls will be made between Money Market, Corporate
Debt Dynamic Bond SBI Dynamic Bond Fund-Reg(G)
Bonds, and Gilts/SDLs at variable maturities based on market dynamics

Debt Gilt Fund ICICI Pru Gilt Fund Fund aims to invest in G-Secs across maturity and takes duration calls based on the underlying interest rate view

Debt Gilt Fund Kotak Gilt Fund Fund actively manages its duration. Current YTM for the fund is 7.6% while mod duration is 4.7 Years

Edelweiss Nifty PSU Bond Plus

Debt Gilt Fund Fund follows passive roll down strategy maturing in April 2027, investing equally in PSU Bonds and SDLs
SDL 50:50 Index Fund-Apr 2027

Gilt Fund with 10 year ICICI Pru Constant Maturity Gilt Fund will invest minimum 80% in G-secs, such that the Macaulay duration of the portfolio is equal to 10 years. The fund currently
Debt Fund(G) has a YT M of ~7.3% and a modified duration of ~6.5 years
constant Duration

The strategy aims to build a diversified portfolio of 12-15 issuers with revenues exceeding INR 500 crore, emphasizing limited
Debt Credit ICICI Pru CCOF Fund II sector exposure, potential for coupon-bearing structures, and collateral coverage of 1.25-2X, while also allowing for
opportunistic real estate investments. The fund is positioned as an extension to I-Pru Credit Fund

The investments will be in the mid-market segment (INR 50-5,000 Cr in revenues) of corporate entities in India. The fund will
Debt Credit SpECS II have an average ticket size of INR 15-50 Cr size, with an average investment tenor of 24-48 months. The fund will identify ~15
investment opportunities and has a tenure of 4 years , which can be extended by 1 year twice.

Note - Bold indicates focus products from the preferred list of products based on current market outlook
*Product is available on PMS Platform Private & Confidential 48
**Product is available on AIF Platform
Source: Spark PWM
Direct Bonds

Non-Convertible Debentures (NCD)*

High Rated (AA- & above)

SL.No. Issuer Instrument Type IP Frequency Rating Yield to Client Maturity Date Residual Tenor

1 Punjab National Bank Perpetual Bonds Annual AA+ 8.30% 13-Feb-25 15

2 Tata Capital Ltd. Corporate Bond Annual AAA 8.05% 03-Dec-26 37

Belstar Microfinance Market Linked

3 At maturity AA- 9.60% 31-Oct-24 13
Limited Debentures

Five Star Business Finance Non Convertible

4 Annual AA- 9.10% 15-Dec-26 40
Ltd. Debentures

High Yield(A+ and below)

MAS Financial Services Market Linked

5 At maturity A+ 8.90% 03-Dec-24 15
Limited Debentures

Market Linked
6 Muthoot Microfin Limited At maturity A+ 10.00% 05-Jun-26 31
Debentures

Spandana Sphoorty Non Convertible Annual Coupon and Principal

7 A 11.00% 04-Sep-26 33
Financial Limited Debentures payments

Subject to Availability and Yields are subject to change

Source: Spark PWM Private & Confidential 49
Nuvama Wealth - Equity Linked MLDs

Issuer Nuvama Wealth Finance Ltd.

Credit Rating PP-MLD AA-
Issue Type Rated, Unlisted Market Linked Debenture
Face Value 10,00,000
Tenor 24/27 Months
Trade Date TBD
Security 1x charge against balance sheet assets
Underlying Index Nifty 50 Index
Principal Protection Principal Protected till maturity, to the extent of face value
Max Coupon 31.65% Abs coupon basis face value
Entry Level Average of official closing levels of Nifty 50 Index as on primary trade date and F&O expiry of next two months
Exit Level Average of official closing levels of Nifty 50 Index as on F&O expiry of 22nd month to 24th month from primary trade date
Return = (Exit Level/Entry Level)-1
Return Level MLD Return
Payoff Structure <0% 0%
0-20% 1.5825 x Return
>20% 31.65%

Subject to Availability and Yields are subject to change

Source: Spark PWM Private & Confidential 50
Spandana Sphoorty Financial - NCD

Details of the Issuance

Issuer Spandana Sphoorty Financial Limited

Type of Instrument Rated Listed Secured NCD

Rating India Ratings A/Stable

Face Value/Debenture INR 1,00,000

Yield 11% XIRR

Interest Payout Annual

Principal Payout Bullet – At Maturity

Trade date 30th November 2023

Maturity date 4th September 2026

Secured by way of a first-ranking, exclusive, and continuing charge on identified receivables equal to 1.1 times the
Security
outstanding amount of the Debentures

Source: Spark PWM

Private & Confidential 51
KrazyBee Services Pvt Ltd - NCD

Product Rated, Listed, Senior, Secured Non Convertible Debentures

Issuer Rating CRISIL A-

Tenor 1.25 Years

Face Value INR 1,00,000

Trade Date 23rd November 2023

Maturity Date 20th Jan 2025

Interest Payout Monthly

Principal Payout Bullet Payment at Maturity

Printed Yield 9.84%

XIRR 10.75%

Source: Spark PWM

Private & Confidential 52
Equity (1/3)

Management
Category Sub-category Product Overview
Format
ICICI Pru Nifty 50 Nifty 50 index fund offers broad market exposure, diversification, and low costs; making it an attractive option for long-term investors seeking
Large Cap Passive - MF
Index Fund consistent performance and accessibility.
Mr. Ihab Dalwai, has been managing the fund since 2016. The fund has shown a superior up capture and down capture ratio compared to its peers.
ICICI Pru Large &
55% of the portfolio is allocated to large-cap companies, while 37% is allocated to mid-cap companies. The fund has significant exposure to BFSI,
Mid Cap Fund Auto, Energy, and Healthcare companies
Large and Midcap Active – MF
Managed by Mr. Saurabh Pant since 2016, the fund has consistently seen an upgrade in its ranking within our ranking model over the past two
SBI Large & Mid
years. This positive trend can be attributed to various factors, including a strong forward score, impressive rolling returns, low standard deviation,
Cap Fund and a superior up capture to down capture ratio
The fund provides investors with a unique opportunity to diversify risk through offshore equities. It has consistently delivered superior returns
Parag Parikh Flexi
compared to its category on a rolling basis, primarily attributed to its better down capture ratio. The fund has been ranked among the top quartile
Cap Fund performers and has significantly outperformed its benchmark.
Fund has an impressive up-to-down capture ratio, consistent outperformance on rolling returns, and lower AUM compared to peers. Lower AUM
Quant Flexi Cap
Active - MF provides fund managers with greater flexibility to generate outperformance and enables them to be more agile in shifting positions across market
Fund capitalizations
Fund has a superior up to down capture ratio compared to the category on the back of superior up capture ratio. ~41% of the portfolio is allocated
Nippon India Multi
towards large cap while 26% is allocated to Mid & 30% towards Small cap. Top 3 sectoral allocation is BFSI (~29.4%), Consumer Retail & Leisure
Cap Fund (22.6%), & Cap Goods (9.9%)
Market Cap
The fund managers follow a “Core” & “Satellite” approach across market cap towards portfolio construction of up to 25 stocks. The core portfolio
Buoyant will consist of companies with predictable cashflows, high dividend yield and industry leadership, while the "Satellite" portfolio will consist of
Active - DPMS*
Opportunities PMS companies that are cyclical, Turnaround candidates and value picks. The portfolio manager doesn't follow a model portfolio approach of portfolio
Multicap/ Flexicap construction
Active –Cat III Renaissance India The fund will be managed by Mr. Pankaj Murarka and is a CAT-III Long only Equity AIF, that is focusing to invest across three major themes
AIF Next Fund III Manufacturing, Digital ecosystem and Technology adoption in manufacturing space. The term of the fund is 6+1+1 years
Spark@75 Flex cap Market cap agnostic approach towards portfolio construction of 20-30 stocks. Fund manger takes active cash calls. Fund manager follows
DPMS - Equity "Growth at Reasonable Price" style of investment
Active - DPMS*
Fund Manager follows a focused portfolio. Stocks selection done with 1-2 years earning horizon. Market cap agnostic approach of portfolio
(Spark Inhouse Spark@75 Core and
construction and fund manager will not invest in companies below INR 1,000 crore of market cap. The fund manager will follow a "Core" and
Product) Satellite DPMS-
"Satellite" approach towards portfolio construction, where the core portion of the portfolio is supported by Satellite portion that benefits from
Equity
theme/sector rotation in Indian market
Active -
NDPMS* Spark Equity Equity Advisory portfolio across listed and unlisted equity space (<25%). Invest in fundamentally strong companies curated by our experienced
(Spark Inhouse NDPMS research team. Target Clients are Investor who seeks high involvement in the portfolio construction process
Product)

Note - Bold indicates focus products from the preferred list of products based on current market outlook
*Product is available on PMS Platform; **Product is available on AIF Platform Private & Confidential 53
Source: Spark PWM
Equity (2/3)

Management
Category Sub-category Product Overview
Format
Mr. Ankit Jain has been the fund manager since its inception. The portfolio allocates 67% towards Mid caps, 15% towards small-cap companies
Mirae Asset Midcap
Fund and 14% towards large-cap companies. Additionally, the fund manager maintains a well-diversified portfolio consisting of approximately 50-60
stocks.
Mid cap Active – MF
Mrs. Sohini Andani has been managing the fund since July 2010. The fund has demonstrated superior up-capture to down-capture ratio compared
SBI Magnum
Midcap Fund to the category, indicating the fund manager’s superior capabilities to cushion the downside while capturing the upside. Fund has 15% allocation
towards small-cap stocks
Nippon India Small Fund has been a consistent performer within the category and has maintained its position in the return ranking table, both in the long and short
Cap Fund^ run. It has a low churn ratio of 21% which is reflective of high conviction of the fund manager Mr. Samir Rachh.
Quant Small Cap The fund has consistently outperformance on rolling returns compared to index across time horizons. Additionally, the fund has a 11% allocation
Market Cap Active – MF Fund towards large-cap companies, which can help cushion the impact of bear markets.
Mr. Chandraprakash Padiyar has been the fund manager since 2018. The fund has received a high rating in our ranking model, primarily due to
Tata Small Cap
Small Cap Fund# several key factors like preferred AUM level in the category, low standard deviation - indicating lower volatility, and superior up capture to down
capture ratios - highlighting the fund's ability to outperform in upward and downward market movements respectively.
The fund prefers to invest in Under-researched, Under-owned, and Under-valued (3U framework) companies that have ample Margin of Safety.
Valentis Rising Star
Active -PMS The fund manager believes in focusing on stocks that are at an inflection point, with an aim to build a portfolio of 15-20 stocks predominantly in
PMS
small cap space with an investment horizon of 3-5 years.
Fund Manager invests in stocks that stratifies the “BMV” model to identify companies with prominent business models, competent management
Active- PMS ICICI PIPE PMS
and available at a reasonable valuation in mid & small cap space. The fund manager follows a GARP style of investment
The fund uses a focused approach towards portfolio construction (up to 30 stocks). The top 5 companies have an allocation of approximately
HDFC Focused 30 ~40%. The highest sectoral allocation is towards banks at ~36%. 78% of the portfolio is allocated towards large-cap companies. The fund has a
Focused Fund Focused Fund Active – MF Fund superior up and down capture ratio compared to the category. The fund is managed by Roshi Jain (ex fund manager Franklin India Focused Equity
Fund) since Jan 2022
Mr. Sankaran Naren has been managing the fund since its inception in August 2004 and is well known in the industry for his fund management
ICICI Pru Value
Value Fund Value Fund Active - MF capabilities. The fund has generated outperformance by demonstrating superior down capture ratio as compared to category peers indicating the
Discovery Fund
fund manager capabilities to restrict the impact of bear market on overall portfolio performance
Nippon India Since 2018, Mr. Vinay Sharma has been managing the fund. It has relatively performed better than index and category for the last 3 years. Fund is
BFSI Active - MF Banking & Financial well diversified with relatively lesser allocation to the large banks like ICICI Bank, HDFC Bank, Axis bank ~46% vs. the benchmark allocation of
Services Fund ~72%. Large cap allocation is 66%, Midcap is 16% & Small Cap is 14%.
Sectoral/ Fund is managed by Mr. Harish Krishnan. It provides an opportunity to participate in capex recovery expected in the medium-term. Top 3 sectoral
Kotak Manufacture
Thematic Manufacturing Active - MF allocation is Auto, Log & Tans. (~34.5%), Healthcare (14.8%) & Cons Retail & Leisure (9.6%)
in India Fund
Fund
Manufacturing - Mirae Nifty Fund provides an opportunity to participate in capex recovery expected in the near-term through passive route. Fund would be investing in Nifty
Nifty Manufacturing Passive - MF Manufacturing India Manufacturing Index ETFs
Index Index ETF/FOF

^Fund Only Allows STP, SIP up to INR 5 Lakhs per PAN; #Only STP and SIP allowed
Note - Bold indicates focus products from the preferred list of products based on current market outlook Private & Confidential 54
Source: Spark PWM
Equity (3/3)

Management
Category Sub-category Product Overview
Format

HDFC Balanced Fund follows a Valuation-based model that incorporates 4-Factors. The factors considered in this model are Trailing Nifty PE & PB Ratio, 1-year
Hybrid -Balanced Advantage Fund Forward Nifty PE Ratio, and the GAP between 10-year G-Sec YTM and Nifty 50 earnings yields.
Advantage/Dynamic Active – MF
Asset Allocation ICICI Pru Balanced The fund utilizes a valuation-based model, specifically the Price to Book Value (P/BV) model. This model increases equity exposure when
Advantage MF valuations are attractive and reduces equity exposure when valuations are expensive. The net equity level ranges between 30% to 80%

Active -
Actively Managed by a team of experience professional across products and asset classes aligned with client’s investment objective and risk
Multi-Asset NDPMS (Spark Spark Multi Asset
Hybrid profile. The Portfolio manager would share his preference across various asset class such as Equity Mutual Fund, Direct Equity, Unlisted Equity,
Inhouse NDPMS
Debt and Alternate Investments.
Product)*

Actively
Managed
Hybrid -ETF/Index Spark All Seasons The fund aims to actively manage a portfolio of passive funds, investing predominantly in ETFs and Index funds across asset classes. The strategy
Passive - DPMS
fund Fund (FOF-DPMS) will invest in 3 major asset classes i.e., Domestic Equities, Global Equities and Debt. The asset allocation will be based as per client’s risk profile.
(Spark Inhouse
Product)*

Passive - Invesco EQQQ The fund will invest 95% - 100% of its assets in Invesco EQQQ Nasdaq-100 UCITS ETF. Giving exposure to 101 largest non-financial companies
Global Funds US-NASADAQ 100
MF - Index FOF NASDAQ 100 FOF listed on the Nasdaq Stock Market based on market capitalization

Growth stage Fund intends to invest in 12 to 15 companies with an average ticket size of INR 30 Cr to INR 100 Cr. Prefers to be the first institutional investor and
Active -
investing in unlisted First Bridge India provide investment to first generation entrepreneurs. The fund will also invest in growth businesses, seeking inflection capital and operational
Cat II AIF**
space support for managing growth and challenges.

Fund intends to invest in 18 to 20 companies with an average stake of 12- 18%. The fund manager intends to invests in Middle India opportunities
Active -
Private Equity ARKAM Fund II i.e. the companies that are looking to provide efficient solutions to the households with annual income between INR 5 to INR 25 lacs. The fund
Cat II AIF
manager will also invest in EV and B2B SaaS space
Early stage investing
in unlisted space
Fund invests in Seed stage companies primarily operating in B2B enterprise tech space. The fund managers believe in “Operator VC” model to add
Active - ARALI VENTURE
value to its portfolio companies. The fund will invest in 18 to 20 companies. The fund targets a 10-15% stake in portfolio companies and will reserve
Cat I AIF FUND II
50% of the fund for the follow-on round in portfolio companies.

Note - Bold indicates focus products from the preferred list of products based on current market outlook
Source: Spark PWM Private & Confidential 55
Disclaimer

Spark PWM Private Limited (formerly known as Spark Family Office and Investment Advisors (India) Private Limited) (“Spark PWM”) is registered with SEBI as a Portfolio Manager, Stock
Broker, Research Analyst, and Mutual Fund Distributor with Association of Mutual Funds of India.
Spark PWM makes no representation or warranty, express or implied, as to the accuracy, completeness or fairness of the information and opinions contained in this document. The
contents of this document are not intended to provide any advice and / or recommendation relating to taxation, legal, business or investment matters and readers are encouraged to seek
professional advice on same. The information and opinion expressed in this document do not constitute an offer or an invitation to make an offer, to buy or sell any securities. This
document does not contain details of any exchange traded products and Spark PWM may act as a distributor, and hence disputes arising under, out of, or in connection with the contents
of this document shall not have access to exchange investor redressal or Arbitration mechanism. This document is provided / distributed by Spark PWM on a strictly confidential basis for
the exclusive use of the recipient and has been obtained from published information and other sources, which Spark PWM or its affiliates consider to be reliable.
Each recipient of this document should make such analysis as it deems necessary to arrive at an independent evaluation with respect to the information provided in this document and
should consult their own advisors to determine the merits and risks of such information. Investment in securities market are subject to market risks. Read all the related documents
carefully before investing. Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to
investors. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or
published, copied, in whole or in part, for any purpose. This document is not directed or intended for distribution to or use by any person or entity who is a citizen or resident of or located
in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject Spark PWM and/or
its affiliates to any registration or licensing requirement within such jurisdiction. Persons in whose possession this document may come are required to inform themselves of and to
observe such applicable restrictions.
This document has been prepared and dependent entirely on the information, which is already available in publicly accessible media, without independent verification on the accuracy and
completeness of the information. All valuation amounts or opinions as to valuation and other financial parameters (if any) specified herein are only indicative and are not intended to be
relied upon as a certificate of valuation of the Company, a fairness opinion or any certification or opinion of Spark PWM on the fair value or valuation of the Company and may not be used
as such by the Company or any Recipient or any other person for the purposes of any law or regulation, including the Companies Act, 2013, SEBI regulations or foreign exchange
regulations. The securities quoted, if any, are for illustration purposes only and are not recommendatory in nature.
Neither Spark PWM nor its affiliates or their respective directors, employees, agents or representatives shall be responsible or liable in any manner, directly or indirectly, for views or
opinions expressed in this document or the contents or any errors or discrepancies herein or for any decisions or actions taken by relying on the document or the inability to use or access
our service or for any loss or damages whether direct or indirect, incidental, special or consequential including without limitation loss of revenue or profits that may arise from or in
connection with the use of or reliance on this document.

Spark PWM Private Limited (formerly known as Spark Family Office and Investment Advisors (India) Private Limited). Registered Office: No. 1, 3rd Floor, First Crescent Park Road, Gandhi
Nagar, Adyar, Chennai 600 020; CIN: U93000TN2012PTC086696; Telephone No.: +91 44 69250000; Website: www.sparkcapital.in; Correspondence Address: Solitaire Corporate Park,
unit 1252 , Building no 12, Andheri Kurla Road, Chakala, Andheri (East), Mumbai 400 093; Telephone No: +91 22 62916700; SEBI Registrations (Stock Broker: INZ000285135; Portfolio
Manager: INP200007274; Research Analyst: INH200008954); AMFI – Registered Mutual Fund Distributor: ARN 86685. Compliance Officer details: Ms. Amrita Pillai; Tel: +91 22 62916700
or email: pwm.compliance@sparkcapital.in.

Private & Confidential 56

Our Offices

Chennai Mumbai Delhi

No. 1, 3rd Floor, No. 302, 3rd Floor, No. 1252, 5th Floor, No. 23, 1st Floor, Community Centre,
First Crescent Park Road, ‘Windsor House’, CST Road, Building No. 12, Solitaire Corporate Park, Basant Lok,
Gandhi Nagar, Adyar, Kalina, Santacruz (East), Andheri Kurla Road, Chakala, Andheri East, Vasant Vihar,
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Private & Confidential 57