DSP BlackRock Investment Managers
India Equity Market – OutlookIndia Equity Market – Outlook
July 2013
Invest in Mutual fu...
Indian Equity Markets – Challenging EnvironmentIndian Equity Markets – Challenging Environment
Invest in Mutual funds onli...
Market Scenario
5 Year Sensex CAGR: 7.58%
0
5000
10000
15000
20000
25000
Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 ...
Infrastructure Bottlenecks
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03...
CAD vs. US$/INR
Depreciating Rupee
42
44
46
48
50
-15
-10
-5
0
Source: CEIC, Ministry of Commerce, Morgan Stanley Research...
GDP growth – Back to old days of 2001-2002
4
6
8
10
12
14
16
18
GDP Services Industry
GDP growth in FY11 – 9.30% GDP growt...
– India’s growth slowdown is partly related to the slowdown in the global growth cycle
– China and Brazil – the other two ...
Are we over-reacting?Are we over-reacting?
Invest in Mutual funds online. Contact your Wealth Advisor:
LIC Agent ANANDARAM...
Different Asset Class Returns
33.0%
3.7%
19.2%
6.2%
8.0% 7.1%
22.1%
11.7%
16.8%
6.9% 7.8% 7.4%
FY04-FY08 FY09-FY13 FY04-FY...
Inflation Erodes the Purchasing Power
100
60
80
100
120
NominalValue
Over 79-14YTD, CPI Inflation has been 8.5%
10
6
-
20
...
Equities Enhance the Purchasing Power
1,226
800.00
1,000.00
1,200.00
1,400.00
1,600.00
1,800.00
PurchasingPower
11
256
100...
Equities Have Created Investor Wealth
Rs. 17,68,679
1,500,000
2,000,000
2,500,000
20 Year CAGR: 11.4% 15 Year CAGR: 12.6% ...
Opportunity within volatility
13000
15000
17000
19000
21000
23000
13
7000
9000
11000
Sensex
…During this Phase as well, Se...
Bull – bear phases over the last 5 years
2008: - 52%
20287
9647
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Au...
Sensex 5 year Rolling Returns
Median CAGR 17.1%
10%
20%
30%
40%
50%
60%
5yr rolling return Median Return
90% of times:
Pos...
Disciplined Approach: True Value Add During Volatile Times
2.00%
4.00%
6.00%
8.00%
SIP vs Lumpsum Investment Returns
16
-6...
Outperformance of Key stocks/Sectors
21%
17% 16% 14% 13% 11%
4%
-12%
-3% -4%
-8% -9%
-20%
-10%
0%
10%
20%
30%
5 Year CAGR ...
Stock Performance Divergence…An Opportunity to Long term Investors…
5 Year CAGR %
31%
27%
25% 24%
20% 19%
17% 17%
15% 15%
...
Indian Equity – A Promising story ahead
19
Invest in Mutual funds online. Contact your Wealth Advisor:
LIC Agent ANANDARAM...
Government Reforms are in the Right Direction
Boost investments:
• Cabinet Committee on Investment to speed up the approva...
Fiscal Deficit is Under Control
Fiscal Deficit
5
6
7
Return to fiscal
prudence
% of GDP
Fiscal stimulus
post the crisis
Fi...
Current Account Deficit: Worst is Behind Us
-6
-5
-4
-3
-2
-1
0
1
2
3
Current account balance
% of GDP
Source: CEIC and No...
Falling Commodity Prices: Boon for India
India, unlike other emerging economies like China, Brazil, etc. is net consumer o...
Lower Twin Deficit to Correct India’s Macro Imbalances
After a tough period from 2009-2012, we expect India’s macro-imbala...
Sensex EPS CAGR FY93-13: 15%
450
523
718
833 820 834
1024
1123
1196
1346
1543
FY93-96: 45% CAGR
FY96-03: 1% CAGR
FY03-08: ...
20.4
21.3
23.4
24.2
24.0
22.8
19.0
15.3
16.9 17.1 16.7
FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13
Sensex ROE (...
BSE Sensex Valuation snapshot
Mar’91 – Mar’13 P/E P/B ROE
Low 8.29 1.58 14.30
Average 14.88 2.57 19.01
High 24.64 4.15 24....
Market returns Vs. Starting P/E
0
20
40
60
80 Avg. 1 yr return
Median 1 yr returnCurrent PE
is 14x
% 1 yr return
28
(60)
(...
Valuation Discount of Mid Caps to Large Caps is at Historical Extremes
0.40
0.50
0.60
0.70
0.80
0.90
BSE Mid Cap Index P/B...
Risks
Geo-political risk
Oil prices: India imports ~85% of its oil requirement yearly
Twin Deficits: Fiscal Deficit and Cu...
Disclaimer
The views expressed are as of July 18, 2013 and may change as subsequent conditions vary. This is a generic pre...
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India equity market – outlook

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India equity market – outlook

  1. 1. DSP BlackRock Investment Managers India Equity Market – OutlookIndia Equity Market – Outlook July 2013 Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  2. 2. Indian Equity Markets – Challenging EnvironmentIndian Equity Markets – Challenging Environment Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  3. 3. Market Scenario 5 Year Sensex CAGR: 7.58% 0 5000 10000 15000 20000 25000 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Sensex 19396 13642 3Source: Bloomberg Industrial Production is low -1001020 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 IIP Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  4. 4. Infrastructure Bottlenecks - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Rsbn - 5,000 10,000 15,000 20,000 25,000 Rsbn Projects announced vs. project stalled 4 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Projects stalled New Projects Announced (RHS) 0% 5% 10% 15% 20% 25% 30% 35% 40% Autos Conglomerates Construction . Cons Nondurables HealthCare Media Metals&Mining Energy IT Telecom Utilities FY13E Avg (FY9-FY12) Capex (as % of sales): FY13E vs. last 4 yr avg Source: Bloomberg, Internal Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  5. 5. CAD vs. US$/INR Depreciating Rupee 42 44 46 48 50 -15 -10 -5 0 Source: CEIC, Ministry of Commerce, Morgan Stanley Research 55 50 52 54 56 58 60 62-35 -30 -25 -20 -15 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13E Current Account Deficit, US$ bn, LS US$/INR, RS (reverse scale) Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  6. 6. GDP growth – Back to old days of 2001-2002 4 6 8 10 12 14 16 18 GDP Services Industry GDP growth in FY11 – 9.30% GDP growth in FY12 – 6.26% GDP growth in FY13 – 5.00% 6 GDP growth in FY03 – 5.5% GDP growth in FY13 – 5.00% -4 -2 0 2 4 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 GDP growth slowing down due to industry slowdown Source: Bloomberg, Internal Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  7. 7. – India’s growth slowdown is partly related to the slowdown in the global growth cycle – China and Brazil – the other two BRIC countries – have also witnessed sharp deceleration of growth in last tow years India’s growth highly correlated with the global growth India’s growth correlation with other two BRIC countries 9 12 15 (GDPgrowth,%) India not decoupled with the global growth cycle 6 9 12 (GDPgrowth,%) -3 0 3 6 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (GDPgrowth,%) Brazil China India Fall in India’s economic growth has been sharper than the fall in global growth in last two years -3 0 3 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (GDPgrowth,%) World GDP growth India GDP growth Source: IMF Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  8. 8. Are we over-reacting?Are we over-reacting? Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  9. 9. Different Asset Class Returns 33.0% 3.7% 19.2% 6.2% 8.0% 7.1% 22.1% 11.7% 16.8% 6.9% 7.8% 7.4% FY04-FY08 FY09-FY13 FY04-FY13 Equities (CNX Nifty) Bank FD Gold 10 Year G Sec % 9 27.37% -3.78% 12.66% 0.60% 0.50% 0.60% 16.53% 4.24% 10.32% 1.30% 0.30% 0.90% FY04-FY08 FY09-FY13 FY04-FY13 Equities (CNX Nifty) Bank FD Gold 10 Year G Sec % Inflation adjusted Equities have out-performed other asset classes over longer periods Source: Bloomberg, Internal Could this phase be an exception? Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  10. 10. Inflation Erodes the Purchasing Power 100 60 80 100 120 NominalValue Over 79-14YTD, CPI Inflation has been 8.5% 10 6 - 20 40 Mar-79 May-80 Jun-81 Jul-82 Aug-83 Oct-84 Nov-85 Dec-86 Jan-88 Mar-89 Apr-90 May-91 Jun-92 Aug-93 Sep-94 Oct-95 Nov-96 Jan-98 Feb-99 Mar-00 Apr-01 Jun-02 Jul-03 Aug-04 Sep-05 Oct-06 Dec-07 Jan-09 Feb-10 Mar-11 May-12 Jun-13 NominalValue Purchasing Power Source: CMIE, Bloomberg & Motilal Oswall. Data as on June 2013. Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  11. 11. Equities Enhance the Purchasing Power 1,226 800.00 1,000.00 1,200.00 1,400.00 1,600.00 1,800.00 PurchasingPower 11 256 100 - 200.00 400.00 600.00 Mar-79 Aug-80 Jan-82 Jun-83 Nov-84 Apr-86 Sep-87 Feb-89 Jul-90 Jan-92 Jun-93 Nov-94 Apr-96 Sep-97 Feb-99 Jul-00 Jan-02 Jun-03 Nov-04 Apr-06 Sep-07 Feb-09 Jul-10 Jan-12 Jun-13 PurchasingPower Sensex Gold Fixed Deposit Source: CMIE, Bloomberg & Motilal Oswall. Data as on June 2013. Information used is for illustrative purposes and should not be construed as an investment advice Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  12. 12. Equities Have Created Investor Wealth Rs. 17,68,679 1,500,000 2,000,000 2,500,000 20 Year CAGR: 11.4% 15 Year CAGR: 12.6% 10 Year CAGR: 18% 12 Rs. 100,000 0 500,000 1,000,000 Jan-91 Feb-92 Mar-93 May-94 Jun-95 Aug-96 Sep-97 Nov-98 Dec-99 Feb-01 Mar-02 May-03 Jun-04 Aug-05 Sep-06 Nov-07 Dec-08 Jan-10 Mar-11 Apr-12 Jun-13 Source: Bloomberg, Internal. The figures mentioned are for illustration purpose only, it does not indicate performance of any of the schemes of DSP BlackRock Mutual Fund Rs. 1,00,000 invested into Sensex in January 1991 would have grown to Rs. 17,68,679 as of June 2013. Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  13. 13. Opportunity within volatility 13000 15000 17000 19000 21000 23000 13 7000 9000 11000 Sensex …During this Phase as well, Sensex has given attractive investment opportunities Source: Bloomberg Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  14. 14. Bull – bear phases over the last 5 years 2008: - 52% 20287 9647 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 9647 17465 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 17465 20509 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 2009: +81% 2010: +17% 14 2011: -25% 2012: +25% Mar May Mar May Mar May 20509 15455 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 15455 19340 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Source: Bloomberg Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  15. 15. Sensex 5 year Rolling Returns Median CAGR 17.1% 10% 20% 30% 40% 50% 60% 5yr rolling return Median Return 90% of times: Positive returns 15 Source: IIFL Research, data as of June 28, 2013 On a 5 year rolling basis, Sensex has delivered a positive return 90% of the times -20% -10% 0% Apr/84 Oct/86 Mar/89 Aug/91 Jan/94 Jun/96 Nov/98 Apr/01 Oct/03 Mar/06 Aug/08 Jan/11 Jun/13 10% of times: Negative returns Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  16. 16. Disciplined Approach: True Value Add During Volatile Times 2.00% 4.00% 6.00% 8.00% SIP vs Lumpsum Investment Returns 16 -6.00% -4.00% -2.00% 0.00% CNX Nifty BSE Sensex BSE100 BSE200 CNX Midcap Lumpsum Investment SIP Investment Notes: Bloomberg, Internal.1. Assuming SIP investment done at the beginning of each month for period starting Jan 1, 2008 to Jun 1, 2013 i.e. 66 months. 2. SIP returns shown above denote the internal rate of return. Lumpsum returns shown above denote the point-to-point annualised return for the period Jan 1, 2008 to June end 2013. The above figures is for illustration purpose only and not an indication of the performance of the schemes of DSP BlackRock Mutual Fund. 3. Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  17. 17. Outperformance of Key stocks/Sectors 21% 17% 16% 14% 13% 11% 4% -12% -3% -4% -8% -9% -20% -10% 0% 10% 20% 30% 5 Year CAGR % 17 -25%-30% BSE-FMCG BSE-Auto BSE-HealthCare BSE-IT BSE-ConsumerDurables BSE-Bankex BSE-Sensex BSE-Realty BSE-Power BSE-PSU BSE-Oil BSE-CapitalGoods BSE-Metal Consumption theme has outperformed capital intensive sectors Source: Bloomberg Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  18. 18. Stock Performance Divergence…An Opportunity to Long term Investors… 5 Year CAGR % 31% 27% 25% 24% 20% 19% 17% 17% 15% 15% 12% 12% 11% 9% 6% 5% 5% 4% 2% 0% -2% -4% -6% -7% 18 Stock Performance Divergence…An Opportunity to Long term Investors… Source: Bloomberg -6% -7% -7% -9% -12% -15% -16% TCS SunPharma.Inds. ITC DrReddy'sLabs M&M HDFCBank HeroMotocorp TataMotors Hind.Unilever Infosys HDFC Cipla Wipro MarutiSuzuki ICICIBank StBkofIndia ONGC SENSEX GAIL(India) JindalSteel Larsen&Toubro TataPowerCo. NTPC BhartiAirtel RelianceInds. HindalcoInds. SterliteInds. TataSteel BHEL Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  19. 19. Indian Equity – A Promising story ahead 19 Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  20. 20. Government Reforms are in the Right Direction Boost investments: • Cabinet Committee on Investment to speed up the approval process for big projects. • Addressed various bottlenecks in road (easier exit clause), coal (imported coal price pass-through), gas (price hike) and power sectors (SEB restructuring, expanding projects eligible for FSA, etc) Attract foreign capital Recent initiatives Key reforms in the pipeline Fiscal prudence • Direct Cash Transfer • Goods and Services Tax Boost investments • Land Acquisition Bill • Mining Development Bill Attract capital flows Source: OECD, CEIC and Nomura Global Economics. Attract foreign capital • Increase FDI limit in multi brand retail, aviation, broadcasting Reduce fiscal deficit • Gradually deregulate diesel prices • Rationalize spending • Increase tax compliance Reduce inflation • Smaller increase in Minimum Support Prices Attract capital flows • FDI limits in telecom, defense, insurance and pension sectors 20 Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  21. 21. Fiscal Deficit is Under Control Fiscal Deficit 5 6 7 Return to fiscal prudence % of GDP Fiscal stimulus post the crisis Fiscal prudence India has always had a high fiscal deficit, but the deficit ballooned post 2008 due to consumption-oriented government spending and lower revenues due to slow growth. However, the government has returned back to the path of fiscal prudence starting Sep 2012 by cutting back on spending and hiking diesel prices. Fiscal deficit in FY13 at 4.9% of GDP was better than budgeted (5.1%). In FY14, while cutting back on spending will be difficult given the upcoming general elections, increased tax compliance is likely to help keep the fiscal deficit in check at 4.8% of GDP. 0 1 2 3 4 FY00 FY02 FY04 FY06 FY08 FY10 FY12 FY14 FY16 at 4.8% of GDP. The government is committed to lowering the fiscal deficit to 3% of GDP by FY17. Structural reforms such as the Goods and Services Tax and the Direct Cash transfer will help bring down the fiscal deficit in the medium term. Hence, risks from the fiscal deficit – a pre-dominant concern over the last 5 years - have receded. 21 Source: Ministry of Finance and Nomura Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  22. 22. Current Account Deficit: Worst is Behind Us -6 -5 -4 -3 -2 -1 0 1 2 3 Current account balance % of GDP Source: CEIC and Nomura Global Economics estimates. INR deprecation - a medium term positive Along with a fiscal deficit, India has also historically had a current account deficit. Recent currency weakness (due to lower inflows) will delay rate cuts. However over time, INR depreciation should improve export competitiveness. Lower commodity prices a boon for India A large part of India’s import basket (45%) is commodity oriented. The fall in commodity prices should help lower the import bill. Sharp fall in gold prices and lower investment demand for gold (due to lower prices and lower inflation) should reduce the gold import bill. Structural reforms an added positive Government’s decision to gradually deregulate diesel prices should help rationalize domestic energy demand and thus reduce oil imports. Therefore, we expect the current account deficit to moderate from 4.8% of GDP in FY13 to 4.3% in FY14 and to 3.0-4.0% by FY15. -6 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 22 Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  23. 23. Falling Commodity Prices: Boon for India India, unlike other emerging economies like China, Brazil, etc. is net consumer of commodities. Wholesales Price Inflation (WPI) for June at 4.86% Y-o-Y, the lowest since Nov 2009, is a positive sign Core inflation has also declined to 2.1% Y-o-Y This decline was a result of the drop in prices of crude oil and gold, which together account for 45% of India’ import bill Every 10% decline in global crude oil prices (for the full year), would result in reducing WPI by 0.8-1.0 percentage point & consumer price inflation by about 0.6 percentage point Every 10% reduction in crude oil prices would result in India’s import bill and current account deficit reducing by about 0.6% of GDP Oil – 6.3% of GDP and 60% of trade deficit US Shale Gas – a game changer 23 Source: Bloomberg, Internal & Deutsche Bank Research account deficit reducing by about 0.6% of GDP -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Sep-11 Mar-12 Sep-12 Mar-13 WPI Inflation (%) …should lead to further fall in inflation -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Sep-11 Mar-12 Sep-12 Mar-13 Change in Commodity Prices YoY%, US$ terms Crude Gold CRB Index Fall in commodity prices…. Gold – 2.7% of GDP and 26% of trade deficit Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  24. 24. Lower Twin Deficit to Correct India’s Macro Imbalances After a tough period from 2009-2012, we expect India’s macro-imbalances (rising consumption-investment gap, sticky inflation, twin deficits and low growth) to start to correct due to fiscal consolidation and recent reforms. While none of the reforms will lead to a quick turnaround in the economy, the government is moving in the right direction. For instance, gas and power price hikes will increase the cost for consumers (which is negative for consumption), while easing the burden for producers and encouraging increased supply (positive for investment) – a rebalancing that is long overdue in India. Lower twin deficit and falling inflation should open up the room for further interest rate cuts. Lower inflation should also lead to a move away from physical savings to financial savings, which will improve banking system liquidity. As India’s macro-economic imbalances correct, we expect the investment cycle to gradually recover, productivity to improve and a pick up in growth. 24 Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  25. 25. Sensex EPS CAGR FY93-13: 15% 450 523 718 833 820 834 1024 1123 1196 1346 1543 FY93-96: 45% CAGR FY96-03: 1% CAGR FY03-08: 25% CAGR FY08-13: 7% CAGR FY13-15E: 14% CAGR FY93-12: 15% CAGR 25 81 129 181 250 266 291 278 280 216 236 272 348 450 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14E FY15E Source: Data as on May 2013 Motilal Oswal Research Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  26. 26. 20.4 21.3 23.4 24.2 24.0 22.8 19.0 15.3 16.9 17.1 16.7 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Sensex ROE (%) Gap Between RoE and Interest Rates Near 10 Year Low 26 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 13.5 15.9 17.2 17.1 16.2 14.9 11.3 8.0 9.0 8.7 8.5 6.9 5.4 6.2 7.1 7.8 7.9 7.6 7.2 7.9 8.4 8.2 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Difference RoE - G-Sec 10 Year G-Sec (%) Average - RHS Source: Motilal Oswal Research Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  27. 27. BSE Sensex Valuation snapshot Mar’91 – Mar’13 P/E P/B ROE Low 8.29 1.58 14.30 Average 14.88 2.57 19.01 High 24.64 4.15 24.19 Current 14.10 2.39 16.7 27 Is this a bad time to invest? Source: Data as on May 2013 Motilal Oswal Research Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  28. 28. Market returns Vs. Starting P/E 0 20 40 60 80 Avg. 1 yr return Median 1 yr returnCurrent PE is 14x % 1 yr return 28 (60) (40) (20) <10x 10-12 12-14 14-16 16-19 19-22 >22 Sensex PE at start of period Historical analysis suggest that investing at current levels has generally yielded double digit returns in the equity market P/E – Price/Earnings; Source: CLSA, data since 1992 for BSE Sensex Index Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  29. 29. Valuation Discount of Mid Caps to Large Caps is at Historical Extremes 0.40 0.50 0.60 0.70 0.80 0.90 BSE Mid Cap Index P/B to BSE Sensex P/B 0.30 0.40 0.50 0.60 0.70 BSE Small Cap Index P/B to BSE Sensex P/B 29 0.30 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 0.20 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Source: Bloomberg, Ambit Capital Calendar YTD performance as on June 24, 2013 INR USD BSE Sensex -4.56% -12.81% BSE Mid Cap -17.29% -24.44% BSE Small Cap -24.20% -30.76% Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  30. 30. Risks Geo-political risk Oil prices: India imports ~85% of its oil requirement yearly Twin Deficits: Fiscal Deficit and Current Account Deficit (CAD) - though there has been some improvement recently Rupee Depreciation Incremental Demand in gold due to falling prices Global macroGlobal macro 30 Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com
  31. 31. Disclaimer The views expressed are as of July 18, 2013 and may change as subsequent conditions vary. This is a generic presentation on India Equity Market; it shall not constitute any offer to sell or solicitation of an offer to buy units of any of the Schemes of the DSP BlackRock Mutual Fund. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. 31 Invest in Mutual funds online. Contact your Wealth Advisor: LIC Agent ANANDARAMAN ARN-30155 Mob: +919843146519 Email : anandaraman.lic@hotmail.com

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