This report will brief you about our perspective of market, its outlook and our strategy which we will be adopting going forward.

1. Adroit PMS
Market Outlook and Strategy
1
This presentation does not contain any investment advice or equity research.
11 September 2019

2. Key message
• Overall domestic equity market outlook – marginally positive,
expect benchmark indices to continue moving in a narrow range in
near term
• Currency outlook – Stable, expect INR to average 70-71 for the year
• Rate outlook – expect more easing
• Asset allocation
• Equity - Overweight
• Debt – Underweight, mix of accrual and credit
• Gold – include in strategic allocation
• Strategy
• Equity: Prefer quality midcap stocks. Sector agnostic.
• Debt: A mix of accrual of credit
2

3. Overall market outlook - Marginally Positive
Outlook for key market parameters
• Macroeconomic environment - Stable*
• Global markets and flows - Negative*
• Technical positioning - Marginally positive*
• Corporate earnings and valuations - Neutral
• Return profile and prospects for alternative assets like gold, real estate, fixed income tec.
- Neutral
• Greed and fear equilibrium - Positive
• Perception about the political establishment - Neutral*
3
Market Outlook

4. • RBI cuts policy Repo Rate by 35bps to 5.4%
• RBI transfers RS1.76trn to central Government from reserves
• Second Round of PSB mergers and Recapitalization announced
• Surcharge on capital gains from Equities for non-corporate assesses withdrawn
• FDI rules in single brand retail, coal mining etc relaxed
• Liquidity measures to support NBFCs announced
• Sino-US trade was accelerates
• Brexit process takes a step forward with suspension of UK parliament to avoid blockage of a
no deal exit
• Status of J&K State changed, war of words with Pakistan becomes louder
4
Noteworthy recent events

5. YTD2019 Indian Market Performance
5
• Fear remained dominant sentiment
• Equity flows drying up
• Nifty flat but stock wise and sector wise performance highly
skewed
• Bond yields lower
• INR weaker
• Precious metals notable gainers

6. Fear remained the dominant sentiment
6
Source: Adroit research, Capitaline

7. Net flows at lower ebb; market correlation poor
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8. Market breadth negative, stock performance highly skewed
8
Source: Adroit research, Capitaline

9. 9
Market breadth negative, stock performance highly skewed
YTD 2019 Market Breadth (NSE)
Advance Decline Unchanged
NIFTY 50 21 29 0
NSE500 150 350 7
NSE All 495 1067 58
Source: Adroit research, Capitaline

10. Realty, IT best performers, Metals, Media and Auto fare the worst
10
Source: Adroit research, Capitaline

11. A reset is on in the market
11
Source: Adroit research, Capitaline

12. YTD Month wise Mutual Fund Performance
12

13. Macro performance
• Growth slows down further
• Fiscal improvement challenged
• External vulnerability rises a tad
• Household stress rises
• Inflation remains benign
13

14. Long term growth trend remains flat
14
Source: Adroit research, Capitaline

15. Historical equity performance poorly correlated with
economic performance
15
Source: Adroit research, Capitaline

16. 1QFY20 weakness driven by both consumption and investment
16

17. Economic activity continues to slow down
17
Source: Adroit research, Capitaline

18. Fiscal improvement stagnate
18
Source: Adroit research, Capitaline

19. 19
Source: Adroit research, Capitaline

20. 20
Source: Adroit research, Capitaline

21. 21
Source: Adroit research, Capitaline

22. Business and Consumer Confidence Worsens
22

23. Inflation remains benign, signs of bottoming
23

24. Monetary easing continues, as growth remains below potential
24

25. 1QFY20 Corporate Performance
• Earnings fail to match expectation again
• Demand slowdown embraces almost all sector
• Financials outshine
25

26. Nifty earnings remain disappointing
Nifty Earnings 1QFY20:
• Nifty Sales (6.4%), EBIDTA (2.8%) and PAT (5.1%) growth was below estimates. Sales
growth was lowest in past 8qtrs. Pertinent to note that EBIDTA was pushed up by
change in Accounting Standard for Leases (AS-116).
• Highest earnings growth was witnessed in airlines, financials and cement, while
metals, auto & auto ancillaries and chemicals reported the highest decline. Cement
was the only sector that surprised the analysts with strong numbers as the realization
remained strong across regions and costs were under check.
• Pharma sector earnings stabilized after declining for many quarters.
• 11/50 Nifty companies cut capex guidance for FY20.
• Post earnings, various brokerages have downgraded Nifty earnings by ~5 to 6% for
FY20 and by ~3.5-4% for FY21. However, ~18-20% Nifty EPS growth estimates for FY20
and FY21 still look rather optimistic and may see further rationalization post 2QFY20
results.
26

27. Nifty earnings remain disappointing
27

28. Sales growth slowest since Dec’16, EBIDTA grows slowest in 8qtrs
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29. Consumption slowdown accelerates
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30. Corporate stress remains high
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31. Earning downgrades accelerate
31

32. Bonds yields soften as INR weakens
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33. Global Market Performance
• World GDP falls to 11 qtr low as trade slumps
• US and Chinese equities best performer despite trade
shenanigans
• USD, Bonds, Gold, Cyrptoes, Crude all gain
• Over $13trn bonds trading with negative yield
33

34. 34Source: Adroit research, Capitaline

35. Global Equities: Chinese Equities best performers despite Trade War and HK Unrest
35
Source: Adroit research, Capitaline

36. USD, Bonds, Gold, Cryptoes all gain
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37. Most of 5yr US S&P500 returns accrued in 2017 only
37

38. 38
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