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Religare Invesco Market Outlook

Jul 06, 2018

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  • 8/17/2019 Religare Invesco Market Outlook

    1/15

    Equity   Market

      Outlook

    Vetri Subramaniam, 

    Chief    Investment

      Officer

     

    December 2015

  • 8/17/2019 Religare Invesco Market Outlook

    2/15

       India’s economic indicators are exhibiting mixed outcomes

       The investment cycle trends have weakened

      India’s twin deficit – Fiscal Deficit and Current account deficit are exhibiting stable trends

       Inflation – Supportive of the RBI’s accommodative stance

       India’s earnings cycle continues to be weak with hope of recovery in FY17

      While visibility of earnings recovery is poor, high degree of operating and financial leverageprovide scope for disproportionate uptick in earnings

       Valuations are at 8% premium to the long term average. It is within our comfort zone (+ or –

    10% of the long term average)

    Equity Market Outlook

    2

  • 8/17/2019 Religare Invesco Market Outlook

    3/15

    India Macro  – Mixed Bag

    3

       India's Index of  Industrial Production (IIP) growth was recorded at ‐3.2% in Nov’15, after hitting 

    a   60

    ‐ month

      high

      of 

      9.8%

      in

      Oct’15

       India's December manufacturing PMI dipped below 50 for the first time in over two years, 

    coming in at 49.1 versus 50.3 in November, as both output and new order flows contracted.

    Source: Bloomberg.

    49.1

    ‐3.20%

    44

    46

    48

    50

    52

    54

    56

    58

    60

    ‐6%

    ‐4%

    ‐2%

    0%

    2%

    4%

    6%

    8%

    10%

    12%

    06/11 10/11 02/12 05/12 09/12 12/12 04/13 07/13 11/13 02/14 06/14 09/14 01/15 05/15 08/15 12/15

         M     a     n     u      f    a     c     t    u     r     i     n     g     P

         M      I

         I     I      P      G     r    o     w     t     h

    IIP Growth (%) and PMI

    Manufacturing PMI IIP

  • 8/17/2019 Religare Invesco Market Outlook

    4/15

    India Lead Indicators ‐ Mixed Bag

    Source: Kotak

       Commercial Vehicles Sales Growth, Passenger Vehicles growth and petroleum products consumption growth have recovered

    and report healthy trends whereas all other parameters like Railway Freight Growth, Export Growth, Credit and Deposit Growth,

    2 wheeler growth continue to report weakness

    4

    ‐10.37%

    ‐15%

    ‐10%

    ‐5%

    0%

    5%

    10%

    15%

         A     p     r      ‐      1      0

         J    u      l      ‐      1      0

         N     o     v

          ‐      1      0

         M     a     r      ‐      1      1

         J    u      l      ‐      1      1

         N     o     v

          ‐      1      1

         M     a     r      ‐      1      2

         J    u      l      ‐      1      2

         N     o     v

          ‐      1      2

         M     a     r      ‐      1      3

         J    u      l      ‐      1      3

         N     o     v

          ‐      1      3

         M     a     r      ‐      1      4

         J    u      l      ‐      1      4

         N     o     v

          ‐      1      4

         M     a     r      ‐      1      5

         J    u      l      ‐      1      5

         N     o     v

          ‐      1      5

    Railway Freight Growth

    ‐24.43%

    ‐40%

    ‐20%

    0%

    20%

    40%

    60%

    80%

         A     p     r      ‐      1      0

         J    u      l      ‐      1      0

         N     o     v

          ‐      1      0

         M     a     r      ‐      1      1

         J    u      l      ‐      1      1

         N     o     v

          ‐      1      1

         M     a     r      ‐      1      2

         J    u      l      ‐      1      2

         N     o     v

          ‐      1      2

         M     a     r      ‐      1      3

         J    u      l      ‐      1      3

         N     o     v

          ‐      1      3

         M     a     r      ‐      1      4

         J    u      l      ‐      1      4

         N     o     v

          ‐      1      4

         M     a     r      ‐      1      5

         J    u      l      ‐      1      5

         N     o     v

          ‐      1      5

    Export Growth

    7.03%

    ‐40%

    ‐20%

    0%

    20%

    40%

    60%

    80%

         A     p     r      ‐      1      0

         J    u      l      ‐      1      0

         N     o     v

          ‐      1      0

         M     a     r      ‐      1      1

         J    u      l      ‐      1      1

         N     o     v

          ‐      1      1

         M     a     r      ‐      1      2

         J    u      l      ‐      1      2

         N     o     v

          ‐      1      2

         M     a     r      ‐      1      3

         J    u      l      ‐      1      3

         N     o     v

          ‐      1      3

         M     a     r      ‐      1      4

         J    u      l      ‐      1      4

         N     o     v

          ‐      1      4

         M     a     r      ‐      1      5

         J    u      l      ‐      1      5

         N     o     v

          ‐      1      5

    Commercial Vehicles Sales Growth

    9.79%

    0%

    5%

    10%

    15%

    20%

    25%

    30%

         A     p     r      ‐      1      0

         J    u      l      ‐      1      0

         N     o     v

          ‐      1      0

         M     a     r      ‐      1      1

         J    u      l      ‐      1      1

         N     o     v

          ‐      1      1

         M     a     r      ‐      1      2

         J    u      l      ‐      1      2

         N     o     v

          ‐      1      2

         M     a     r      ‐      1      3

         J    u      l      ‐      1      3

         N     o     v

          ‐      1      3

         M     a     r      ‐      1      4

         J    u      l      ‐      1      4

         N     o     v

          ‐      1      4

         M     a     r      ‐      1      5

         J    u      l      ‐      1      5

         N     o     v

          ‐      1      5

    Credit Growth

  • 8/17/2019 Religare Invesco Market Outlook

    5/15

    India Investment Cycle  ‐ Weakness post 

    initial rebound

    Source: CMIE, Citi

       After initial rebound in first 2 quarters of FY16 new projects announcement fell sharply by 74%

    YoY and 65% qoq in 3q16    For 9 months FY16, new project announcement is down 34% YoY

       Projects under implementation but stalled also continue to inch up by 11% YoY and 3% qoq.

    Quarterly New Project announcements (Rs bn)  – fall from earli