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
1. Market Outlook and Strategy Review
September 2019
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This presentation does not contain any investment advice or equity research.
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
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3. Market Outlook
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*
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4. Noteworthy recent events
• 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• Surcharge on capital gains from Equities for non-corporate assesses withdrawn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
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5. YTD2019 Indian Market Performance
• Fear remained dominant sentiment
• Equity flows drying up
• Nifty flat but stock wise and sector wise performance highly skewed
• Bond yields lower• Bond yields lower
• INR weaker
• Precious metals notable gainers
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25. 1QFY20 Corporate Performance
• Earnings fail to match expectation again
• Demand slowdown embraces almost all sector
• Financials outshine
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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 realizationwas 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.
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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• Over $13trn bonds trading with negative yield
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