The document discusses four investment themes in Indian equities over the next few years:
1. Falling inflation will likely lead the RBI to lower interest rates, boosting credit growth and sectors like banks and autos.
2. Lower interest rates will spur demand for loans and revive industrial production and GDP growth, benefiting cyclical sectors like infrastructure, cement, and capital goods.
3. Implementation of key government reforms in areas like land acquisition, mining, and labor will boost sectors like power, steel, and cement.
4. Recovery in the global economy and commodity prices will help commodity-linked sectors as demand increases.
The author believes positioning a portfolio across these themes can generate strong returns
The document provides an overview of various financial markets and economic indicators from an investment advisory perspective. It discusses recent performance and outlook for domestic and global equities, bonds, commodities, real estate and other asset classes. Some key points are: domestic inflation slowed while wholesale prices contracted, Indian GDP growth was 7.3% for the year, concerns around a weak monsoon may impact inflation, global markets remain sensitive to developments in Europe and potential US rate hikes.
India Strategy: Politics, Will the standoff on bills be an issue?IndiaNotes.com
- Growth expectations for India have been revised downward as headwinds increase. Infrastructure and IT sectors are seen as the best opportunities.
- Politics and rising oil prices could increase volatility in the markets in the near term. Interest rates are not expected to fall sharply.
- Exports are contracting while non-oil, non-gold imports are rising, posing challenges for the trade deficit.
Monthly Asset class performance & outlookvignesh SBK
The summary provides an overview of key economic and market updates from various countries and sectors based on an advisory report from Hedge Research & Strategies Group.
The report notes that major equity markets were mixed in April with the Nifty up 0.65% while DAX was down 0.95%. Major bond yields declined. Commodity prices were also mixed. The US economy showed signs of recovery while Eurozone growth was led by Germany. Japan raised sales tax but saw a wider trade deficit. China took steps to steady its slowing economy.
In India, markets saw bullish trends on election optimism. RBI kept rates unchanged. Various sectors are analyzed including metals, banking, IT, automobiles and FMCG
The document provides an overview of global and domestic economic conditions and outlooks across various sectors in a monthly investment advisory. Some key points:
- Global equity markets saw declines in September due to ongoing weakness in China and fears of rising US interest rates. Domestic Indian markets were also impacted by foreign outflows.
- The RBI cut interest rates by 50 basis points to boost the Indian economy amid signs of recovery in industrial growth and moderating inflation. This was welcomed by markets.
- Sector outlooks varied with IT, healthcare and financials expected to outperform while metals and utilities faced challenges due to global and regulatory factors. Government policy changes could boost infrastructure.
The document provides an economic outlook and analysis for India. It discusses recent economic data and performance across various sectors in India and globally. Some key points:
- GDP growth improved slightly to 4.8% in Q2 FY14 but remains below 5%. Services sector growth is slowing.
- Inflation remains elevated with WPI at 7.52% and CPI at 11.24% in Nov 2013. Food inflation is a major contributor.
- RBI kept policy rates unchanged in its recent meeting despite higher inflation, expecting food prices to decline. Rate hikes may resume in H1 2014.
- Global growth outlook remains positive which will support equity markets. Recovery is strengthening in the
The new government needs to
- The global investment climate became moderately positive in February, with the outlook on India improving considerably due to deteriorating fundamentals in other emerging markets.
restart the programme in a big way
- Quarterly company results surprised positively against the deteriorating macro scenario. It remains to be seen if this marks a turnaround or short-term improvements.
to meet its fiscal deficit targets and
- Going into March, equities may rally on expectations of a pro-reform government after elections. However, the market will be highly sensitive to the
The document provides an overview of the key topics covered in the Indian Economic Survey of 2011-12, including:
1) What is an economic survey and its purpose of reviewing the previous year's economic performance and prospects.
2) The status of the Indian economy in 2011-12, with growth estimated at 6.9% compared to 8.4% in the previous two years, largely due to weakening industrial growth.
3) Highlights and conclusions from the survey covering fiscal developments, prices and monetary policy, trade, agriculture, industry, infrastructure and other sectors.
The document provides an overview of the Indian and global economic and market environment from July 09-13, 2012. It summarizes key data points such as Indian GDP growth projections of 6-6.5% for FY13, upcoming inflation data and its implications, recent Chinese GDP growth of 7.6%, and positive FII flows into Indian equity markets. It also previews upcoming company results and maintains a positive outlook on Indian markets.
The document provides an overview of various financial markets and economic indicators from an investment advisory perspective. It discusses recent performance and outlook for domestic and global equities, bonds, commodities, real estate and other asset classes. Some key points are: domestic inflation slowed while wholesale prices contracted, Indian GDP growth was 7.3% for the year, concerns around a weak monsoon may impact inflation, global markets remain sensitive to developments in Europe and potential US rate hikes.
India Strategy: Politics, Will the standoff on bills be an issue?IndiaNotes.com
- Growth expectations for India have been revised downward as headwinds increase. Infrastructure and IT sectors are seen as the best opportunities.
- Politics and rising oil prices could increase volatility in the markets in the near term. Interest rates are not expected to fall sharply.
- Exports are contracting while non-oil, non-gold imports are rising, posing challenges for the trade deficit.
Monthly Asset class performance & outlookvignesh SBK
The summary provides an overview of key economic and market updates from various countries and sectors based on an advisory report from Hedge Research & Strategies Group.
The report notes that major equity markets were mixed in April with the Nifty up 0.65% while DAX was down 0.95%. Major bond yields declined. Commodity prices were also mixed. The US economy showed signs of recovery while Eurozone growth was led by Germany. Japan raised sales tax but saw a wider trade deficit. China took steps to steady its slowing economy.
In India, markets saw bullish trends on election optimism. RBI kept rates unchanged. Various sectors are analyzed including metals, banking, IT, automobiles and FMCG
The document provides an overview of global and domestic economic conditions and outlooks across various sectors in a monthly investment advisory. Some key points:
- Global equity markets saw declines in September due to ongoing weakness in China and fears of rising US interest rates. Domestic Indian markets were also impacted by foreign outflows.
- The RBI cut interest rates by 50 basis points to boost the Indian economy amid signs of recovery in industrial growth and moderating inflation. This was welcomed by markets.
- Sector outlooks varied with IT, healthcare and financials expected to outperform while metals and utilities faced challenges due to global and regulatory factors. Government policy changes could boost infrastructure.
The document provides an economic outlook and analysis for India. It discusses recent economic data and performance across various sectors in India and globally. Some key points:
- GDP growth improved slightly to 4.8% in Q2 FY14 but remains below 5%. Services sector growth is slowing.
- Inflation remains elevated with WPI at 7.52% and CPI at 11.24% in Nov 2013. Food inflation is a major contributor.
- RBI kept policy rates unchanged in its recent meeting despite higher inflation, expecting food prices to decline. Rate hikes may resume in H1 2014.
- Global growth outlook remains positive which will support equity markets. Recovery is strengthening in the
The new government needs to
- The global investment climate became moderately positive in February, with the outlook on India improving considerably due to deteriorating fundamentals in other emerging markets.
restart the programme in a big way
- Quarterly company results surprised positively against the deteriorating macro scenario. It remains to be seen if this marks a turnaround or short-term improvements.
to meet its fiscal deficit targets and
- Going into March, equities may rally on expectations of a pro-reform government after elections. However, the market will be highly sensitive to the
The document provides an overview of the key topics covered in the Indian Economic Survey of 2011-12, including:
1) What is an economic survey and its purpose of reviewing the previous year's economic performance and prospects.
2) The status of the Indian economy in 2011-12, with growth estimated at 6.9% compared to 8.4% in the previous two years, largely due to weakening industrial growth.
3) Highlights and conclusions from the survey covering fiscal developments, prices and monetary policy, trade, agriculture, industry, infrastructure and other sectors.
The document provides an overview of the Indian and global economic and market environment from July 09-13, 2012. It summarizes key data points such as Indian GDP growth projections of 6-6.5% for FY13, upcoming inflation data and its implications, recent Chinese GDP growth of 7.6%, and positive FII flows into Indian equity markets. It also previews upcoming company results and maintains a positive outlook on Indian markets.
The document provides an economic outlook and analysis across various sectors in India. It discusses that the RBI kept interest rates unchanged in its recent monetary policy review due to ongoing uncertainties around inflation. While inflation is falling, risks remain from the monsoon season, upcoming general elections, and US Fed tapering. The equity outlook remains positive with expectations of strong corporate earnings growth. Key sectors that are expected to perform well include banking, infrastructure, IT, and pharma. Overall, the analysis maintains a bullish stance on the Indian equity market.
- India's stock market benchmark NIFTY delivered negative returns of -3.86% in 2015, breaking the streak of positive returns since 2012. This was due to lower corporate earnings growth, higher debt levels, and a weakening global economy.
- Key factors negatively impacting the Indian market were a slowdown in the Chinese economy, falling commodity prices, and troubled European economies. Domestic factors included deteriorating corporate sales and profitability in subsequent quarters of 2015.
- However, India remained the fastest growing major economy in 2015. The medium to long term outlook for India remains positive due to ongoing economic reforms, making it an attractive investment destination despite short term challenges.
The document provides an economic outlook and summary of key markets for May 2014. It discusses expectations for the upcoming general election in India and implications for various asset classes. The equity outlook remains positive on expectations that a reform-oriented government will accelerate the economy and revive the growth and earnings cycle. The document recommends overweight positions in healthcare, IT/ITES, banking, energy, and neutral stances on power utilities and automobiles.
The document provides an economic update and outlook for various markets including equity, debt, commodities, real estate, and forex. It discusses recent inflation and growth trends in India and globally. Recommendations are given to overweight sectors like healthcare, telecom and IT while remaining neutral or underweight on others given the domestic and international economic environment.
The Union Finance Minister Shri Arun Jaitley tabled the Economic Survey 2016-17 today, the first day of the Budget Session of the Parliament. The Economic Survey says that the adverse impact of demonetisation on GDP growth will be transitional and the economy will recover with remonetisation. The Survey states that once the cash supply is replenished, which is likely to be achieved by end of March 2017, the economy would revert to normal. The GDP growth in 2017-18, as per the survey, is projected to be in the range of 6¾-7½ percent.
The Survey suggests a few measures to maximise long-term benefits and minimise short-term costs. One, fast remonetisation and early elimination of withdrawal limits. This would reduce GDP growth deceleration and cash hoarding. Two, continued impetus to digitalisation while ensuring that this transition is gradual and inclusive, and appropriately balances the costs and benefits of cash versus digitalisation. Three, following up demonetisation by bringing land and real estate into the GST. Four, reducing tax rates and stamp duties.
This is an analysis and brief overview document on the Survey
The document provides an overview of the Indian and global macroeconomic environment and financial markets for the week of August 04-09, 2014. Some of the key points summarized are:
- The RBI reduced statutory liquidity ratio requirements, adding Rs. 40,000 crores in liquidity, while keeping interest rates unchanged. Bond yields have cooled off as a result.
- Inflation has been trending downward, but food and vegetable prices remain high. The RBI governor has reiterated the targets of reducing CPI to 8% by January 2015 and 6% by January 2016.
- Fiscal deficit is projected to be 4.5% of GDP for the current year versus the target of 4
This document provides an economic update and outlook for India. It summarizes that India's GDP growth slowed to a 10-year low of 4.5% in the third quarter due to declines in agriculture, mining, and manufacturing. Inflation rates have been falling but remain elevated. The RBI recently cut interest rates and expects further monetary easing this fiscal year alongside reforms to revive investment and growth. Equity markets have performed well recently and earnings are expected to grow 12% this year led by private banks, healthcare and consumer companies. The outlook provides sector views, favoring healthcare, banking, and FMCG.
A general take on the Modi-phenomenon that has swept the stock markets! With structural changes finally being implemented by the new government we can expect a decade of massive growth. First uploaded as an Instablog on SeekingAlpha in September
The document provides an economic and market update for investors. It discusses positive macroeconomic data from India including rising industrial production and falling inflation. The budget focuses on infrastructure growth. Globally, the US and Europe are recovering while emerging markets are benefiting from foreign inflows. The document recommends remaining invested in equities and outlines positive views for several sectors like banking, energy, and automobiles. It provides a target of 29,300 for the Sensex by the end of the year based on earnings growth expectations.
- Global equity markets rose as central banks emphasized growth over inflation, though manufacturing data was weak. Bond yields were largely unchanged.
- In Asia, regional markets were up except Japan and Indonesia. China's PMI fell slightly. Taiwan's economy grew slower due to weaker trade. India cut rates further.
- European stocks rose as the ECB cut rates and Italy formed a new government. Growth forecasts for Europe were lowered. UK data beat expectations.
- US stocks outperformed on strong jobs and consumer confidence data. The Fed maintained asset purchases but may adjust the amount based on conditions.
India Strategy: All eyes on growth - Prabhudas LilladherIndiaNotes.com
- The document discusses India's strategy and top investment ideas. It provides an overview of key macroeconomic factors in India such as growth, inflation, monsoon, and the current account deficit. It also reviews global and Indian market performance. The document recommends remaining overweight on financial, automobile, and infrastructure stocks, and maintains a neutral stance on healthcare, IT, and capital goods. It highlights several companies as top picks including HDFC Bank, SBI, Axis Bank, and L&T.
The document provides a weekly summary of domestic and global macroeconomic indicators and equity market performance for the week of June 09-13, 2014.
Key points:
- In India, inflation cooled slightly while industrial output growth surprised positively in April. The markets corrected 5% on the mixed economic data.
- Globally, data showed steady growth in China and rebounds in Eurozone industrial production and US business inventories.
- The upcoming Indian budget on July 10th is expected to focus on infrastructure spending, GST implementation, and reforms to direct taxes and FDI limits.
This document provides an overview and analysis of the Indian economy in 2011-12. It summarizes the key findings of the annual Economic Survey presented to Parliament, including a slowdown in GDP growth to 6.9% due to weak industrial growth, high inflation that has begun to decline, and a likely fiscal deficit slippage. It also discusses developments in agriculture, industry, fiscal policy, prices, trade and the global economic challenges faced by India.
- Infosys reported quarterly results that came in below expectations, with margins declining sharply due to pricing pressures. The company guided for 6-10% revenue growth for FY2014, below industry projections.
- India's annual consumer price inflation slowed to 10.39% in March, while industrial production growth was 0.6% in February.
- Crude oil prices have cooled off in recent weeks, which will provide relief to India's current account and fiscal deficits if prices remain low. The author remains positive on oil and gas companies.
The document provides an economic and market update for November 2013. It discusses positive performance in global equity markets and stability in the Indian rupee and debt markets in October. The Chief Investment Officer notes that while markets have reached new highs, fundamentals are also improving as earnings growth is catching up to price increases. Some market optimism also reflects speculation around the next elections in India. Overall the outlook is cautiously positive but volatility could increase from unexpected events.
ChoiceBroking - Q2FY16 GDP growth at 7.4%; robust manufacturing expansion indicates revival in economic scenario. To read our monthly economic outlook please click here http://bit.ly/1QTqJKI
This document summarizes key fiscal and economic developments in India in 2020-21. It notes that monthly GST collections have reached their highest levels since the introduction of GST. Merchandise exports contracted by 15.7% in April-December 2020 compared to the same period the previous year, with petroleum, oil and lubricants exports contributing negatively. Rural-urban differences in consumer price inflation declined, with food inflation converging. The share of agriculture in India's gross value added at current prices was 17.8% for 2019-20. The document is ready to answer questions on these topics. It provides references to the Indian economic survey and other sources for more details.
The document provides an economic update and outlook for India. It notes that India's GDP growth was 4.8% in the last quarter, slightly higher than the previous quarter's 4.7% but below the previous year's 6.2%. Industrial production growth slowed to 2% in April 2013. While inflation tapered to 4.7% due to fuel prices, food inflation increased to 7.64% due to higher vegetable prices. The RBI kept interest rates unchanged to address inflation risks and the current account deficit given the rupee's sharp depreciation from reversal of foreign institutional investment debt inflows on expectations of reduced US stimulus.
The document provides an economic update and outlook for India. It notes that India's GDP growth was 4.8% in the last quarter, slightly higher than the previous quarter's 4.7% but below the previous year's 6.2%. Industrial production growth slowed to 2% in April 2013. While inflation tapered to 4.7% due to fuel prices, food inflation increased to 7.64% due to higher vegetable prices. The RBI kept interest rates unchanged and will focus on inflation and the current account deficit over growth. Bank credit growth was lower and the rupee depreciated due to reversal of foreign institutional investment inflows.
From the Desk of the CEO.
The heat is on. While many of us have been vacationing in cooler climes, the Sensex has kept itself rather busy, gaining another 4% during the month of May. The upmove has come largely on the back of better-than-expected corporate results and expectations of a good monsoon. Markets are also taking cognisance of various indicators like improved auto sales, higher steel and cement offtake, public infrastructure spending, etc. which are positive signs of an imminent economic recovery.
Crude prices have silently crept up and are currently hovering at the $50 level, almost double from the January lows. So despite the adverse implications of higher crude prices on the Indian economy, there seems to be some positive correlation between crude prices and the equity markets. Though this pattern may not have always played out in the last few decades, the first few months of 2016 certainly seem to indicate so. The main reason for this is the significantly high weightage that the Energy sector has in indices the world over. When oil plummeted to sub-$30 levels, it seriously impacted the profitability of some of the world’s biggest corporations, not only causing their stock prices to fall sharply, but also impacting the broader markets in general. It also indicated a global recessionary trend, thus affecting investor sentiment and causing them to become nervous and risk-averse. The bounce back in crude has brought the price to a level that makes it profitable for companies to drill, creating a sense of well-being for both, the Energy sector as well as the countries whose economies are dependent solely on oil. Where crude prices go from here remains to be seen.
After several quarters of benign inflation, the WPI rose to 0.34% while retail inflation soared to 5.39% in April 2016. This, coupled with higher oil prices would make it difficult for Governor Rajan to announce a rate cut at the next RBI policy meeting on 7th June. Across the globe however, Janet Yellen’s comments on improving economic data in the US has the markets believing that a rate hike by the US Federal Reserve is a high possibility during its next meeting in mid-June. The outcome of Britain’s referendum on Brexit is also an event that we will be closely watching.
With markets factoring in all the good news for now, conventional logic says that short term investors need to be cautious. But when the stock market catches momentum, all negative predictions may be proven wrong.
There are of course, many more bulls than bears when it comes to a 1 year plus view. Long term investors may continue their investments and look to buy into any dips.
Wish all of you a happy monsoon season.
Despite a slowing global recovery, growth is projected to be 3.3% in 2014 and 3.8% in 2015. Advanced economies are expected to see faster growth led by the US, while the eurozone recovery remains weak. Emerging markets face more divergence, with steady growth in Asia but slower growth in Latin America, Russia, and the Middle East. Short-term risks include worsening geopolitical tensions and reversals in financial markets.
- Global equity markets saw sharp corrections in January led by a steep fall in crude oil prices. The Nifty breached 7500 support level touching a 52-week low.
- Third quarter Indian company results were mixed, with some benefiting from lower commodities while banks may need more time to recover.
- The budget will be a key upcoming event, with the government expected to focus on rural spending, manufacturing, and fiscal reforms.
The document provides an economic outlook and analysis across various sectors in India. It discusses that the RBI kept interest rates unchanged in its recent monetary policy review due to ongoing uncertainties around inflation. While inflation is falling, risks remain from the monsoon season, upcoming general elections, and US Fed tapering. The equity outlook remains positive with expectations of strong corporate earnings growth. Key sectors that are expected to perform well include banking, infrastructure, IT, and pharma. Overall, the analysis maintains a bullish stance on the Indian equity market.
- India's stock market benchmark NIFTY delivered negative returns of -3.86% in 2015, breaking the streak of positive returns since 2012. This was due to lower corporate earnings growth, higher debt levels, and a weakening global economy.
- Key factors negatively impacting the Indian market were a slowdown in the Chinese economy, falling commodity prices, and troubled European economies. Domestic factors included deteriorating corporate sales and profitability in subsequent quarters of 2015.
- However, India remained the fastest growing major economy in 2015. The medium to long term outlook for India remains positive due to ongoing economic reforms, making it an attractive investment destination despite short term challenges.
The document provides an economic outlook and summary of key markets for May 2014. It discusses expectations for the upcoming general election in India and implications for various asset classes. The equity outlook remains positive on expectations that a reform-oriented government will accelerate the economy and revive the growth and earnings cycle. The document recommends overweight positions in healthcare, IT/ITES, banking, energy, and neutral stances on power utilities and automobiles.
The document provides an economic update and outlook for various markets including equity, debt, commodities, real estate, and forex. It discusses recent inflation and growth trends in India and globally. Recommendations are given to overweight sectors like healthcare, telecom and IT while remaining neutral or underweight on others given the domestic and international economic environment.
The Union Finance Minister Shri Arun Jaitley tabled the Economic Survey 2016-17 today, the first day of the Budget Session of the Parliament. The Economic Survey says that the adverse impact of demonetisation on GDP growth will be transitional and the economy will recover with remonetisation. The Survey states that once the cash supply is replenished, which is likely to be achieved by end of March 2017, the economy would revert to normal. The GDP growth in 2017-18, as per the survey, is projected to be in the range of 6¾-7½ percent.
The Survey suggests a few measures to maximise long-term benefits and minimise short-term costs. One, fast remonetisation and early elimination of withdrawal limits. This would reduce GDP growth deceleration and cash hoarding. Two, continued impetus to digitalisation while ensuring that this transition is gradual and inclusive, and appropriately balances the costs and benefits of cash versus digitalisation. Three, following up demonetisation by bringing land and real estate into the GST. Four, reducing tax rates and stamp duties.
This is an analysis and brief overview document on the Survey
The document provides an overview of the Indian and global macroeconomic environment and financial markets for the week of August 04-09, 2014. Some of the key points summarized are:
- The RBI reduced statutory liquidity ratio requirements, adding Rs. 40,000 crores in liquidity, while keeping interest rates unchanged. Bond yields have cooled off as a result.
- Inflation has been trending downward, but food and vegetable prices remain high. The RBI governor has reiterated the targets of reducing CPI to 8% by January 2015 and 6% by January 2016.
- Fiscal deficit is projected to be 4.5% of GDP for the current year versus the target of 4
This document provides an economic update and outlook for India. It summarizes that India's GDP growth slowed to a 10-year low of 4.5% in the third quarter due to declines in agriculture, mining, and manufacturing. Inflation rates have been falling but remain elevated. The RBI recently cut interest rates and expects further monetary easing this fiscal year alongside reforms to revive investment and growth. Equity markets have performed well recently and earnings are expected to grow 12% this year led by private banks, healthcare and consumer companies. The outlook provides sector views, favoring healthcare, banking, and FMCG.
A general take on the Modi-phenomenon that has swept the stock markets! With structural changes finally being implemented by the new government we can expect a decade of massive growth. First uploaded as an Instablog on SeekingAlpha in September
The document provides an economic and market update for investors. It discusses positive macroeconomic data from India including rising industrial production and falling inflation. The budget focuses on infrastructure growth. Globally, the US and Europe are recovering while emerging markets are benefiting from foreign inflows. The document recommends remaining invested in equities and outlines positive views for several sectors like banking, energy, and automobiles. It provides a target of 29,300 for the Sensex by the end of the year based on earnings growth expectations.
- Global equity markets rose as central banks emphasized growth over inflation, though manufacturing data was weak. Bond yields were largely unchanged.
- In Asia, regional markets were up except Japan and Indonesia. China's PMI fell slightly. Taiwan's economy grew slower due to weaker trade. India cut rates further.
- European stocks rose as the ECB cut rates and Italy formed a new government. Growth forecasts for Europe were lowered. UK data beat expectations.
- US stocks outperformed on strong jobs and consumer confidence data. The Fed maintained asset purchases but may adjust the amount based on conditions.
India Strategy: All eyes on growth - Prabhudas LilladherIndiaNotes.com
- The document discusses India's strategy and top investment ideas. It provides an overview of key macroeconomic factors in India such as growth, inflation, monsoon, and the current account deficit. It also reviews global and Indian market performance. The document recommends remaining overweight on financial, automobile, and infrastructure stocks, and maintains a neutral stance on healthcare, IT, and capital goods. It highlights several companies as top picks including HDFC Bank, SBI, Axis Bank, and L&T.
The document provides a weekly summary of domestic and global macroeconomic indicators and equity market performance for the week of June 09-13, 2014.
Key points:
- In India, inflation cooled slightly while industrial output growth surprised positively in April. The markets corrected 5% on the mixed economic data.
- Globally, data showed steady growth in China and rebounds in Eurozone industrial production and US business inventories.
- The upcoming Indian budget on July 10th is expected to focus on infrastructure spending, GST implementation, and reforms to direct taxes and FDI limits.
This document provides an overview and analysis of the Indian economy in 2011-12. It summarizes the key findings of the annual Economic Survey presented to Parliament, including a slowdown in GDP growth to 6.9% due to weak industrial growth, high inflation that has begun to decline, and a likely fiscal deficit slippage. It also discusses developments in agriculture, industry, fiscal policy, prices, trade and the global economic challenges faced by India.
- Infosys reported quarterly results that came in below expectations, with margins declining sharply due to pricing pressures. The company guided for 6-10% revenue growth for FY2014, below industry projections.
- India's annual consumer price inflation slowed to 10.39% in March, while industrial production growth was 0.6% in February.
- Crude oil prices have cooled off in recent weeks, which will provide relief to India's current account and fiscal deficits if prices remain low. The author remains positive on oil and gas companies.
The document provides an economic and market update for November 2013. It discusses positive performance in global equity markets and stability in the Indian rupee and debt markets in October. The Chief Investment Officer notes that while markets have reached new highs, fundamentals are also improving as earnings growth is catching up to price increases. Some market optimism also reflects speculation around the next elections in India. Overall the outlook is cautiously positive but volatility could increase from unexpected events.
ChoiceBroking - Q2FY16 GDP growth at 7.4%; robust manufacturing expansion indicates revival in economic scenario. To read our monthly economic outlook please click here http://bit.ly/1QTqJKI
This document summarizes key fiscal and economic developments in India in 2020-21. It notes that monthly GST collections have reached their highest levels since the introduction of GST. Merchandise exports contracted by 15.7% in April-December 2020 compared to the same period the previous year, with petroleum, oil and lubricants exports contributing negatively. Rural-urban differences in consumer price inflation declined, with food inflation converging. The share of agriculture in India's gross value added at current prices was 17.8% for 2019-20. The document is ready to answer questions on these topics. It provides references to the Indian economic survey and other sources for more details.
The document provides an economic update and outlook for India. It notes that India's GDP growth was 4.8% in the last quarter, slightly higher than the previous quarter's 4.7% but below the previous year's 6.2%. Industrial production growth slowed to 2% in April 2013. While inflation tapered to 4.7% due to fuel prices, food inflation increased to 7.64% due to higher vegetable prices. The RBI kept interest rates unchanged to address inflation risks and the current account deficit given the rupee's sharp depreciation from reversal of foreign institutional investment debt inflows on expectations of reduced US stimulus.
The document provides an economic update and outlook for India. It notes that India's GDP growth was 4.8% in the last quarter, slightly higher than the previous quarter's 4.7% but below the previous year's 6.2%. Industrial production growth slowed to 2% in April 2013. While inflation tapered to 4.7% due to fuel prices, food inflation increased to 7.64% due to higher vegetable prices. The RBI kept interest rates unchanged and will focus on inflation and the current account deficit over growth. Bank credit growth was lower and the rupee depreciated due to reversal of foreign institutional investment inflows.
From the Desk of the CEO.
The heat is on. While many of us have been vacationing in cooler climes, the Sensex has kept itself rather busy, gaining another 4% during the month of May. The upmove has come largely on the back of better-than-expected corporate results and expectations of a good monsoon. Markets are also taking cognisance of various indicators like improved auto sales, higher steel and cement offtake, public infrastructure spending, etc. which are positive signs of an imminent economic recovery.
Crude prices have silently crept up and are currently hovering at the $50 level, almost double from the January lows. So despite the adverse implications of higher crude prices on the Indian economy, there seems to be some positive correlation between crude prices and the equity markets. Though this pattern may not have always played out in the last few decades, the first few months of 2016 certainly seem to indicate so. The main reason for this is the significantly high weightage that the Energy sector has in indices the world over. When oil plummeted to sub-$30 levels, it seriously impacted the profitability of some of the world’s biggest corporations, not only causing their stock prices to fall sharply, but also impacting the broader markets in general. It also indicated a global recessionary trend, thus affecting investor sentiment and causing them to become nervous and risk-averse. The bounce back in crude has brought the price to a level that makes it profitable for companies to drill, creating a sense of well-being for both, the Energy sector as well as the countries whose economies are dependent solely on oil. Where crude prices go from here remains to be seen.
After several quarters of benign inflation, the WPI rose to 0.34% while retail inflation soared to 5.39% in April 2016. This, coupled with higher oil prices would make it difficult for Governor Rajan to announce a rate cut at the next RBI policy meeting on 7th June. Across the globe however, Janet Yellen’s comments on improving economic data in the US has the markets believing that a rate hike by the US Federal Reserve is a high possibility during its next meeting in mid-June. The outcome of Britain’s referendum on Brexit is also an event that we will be closely watching.
With markets factoring in all the good news for now, conventional logic says that short term investors need to be cautious. But when the stock market catches momentum, all negative predictions may be proven wrong.
There are of course, many more bulls than bears when it comes to a 1 year plus view. Long term investors may continue their investments and look to buy into any dips.
Wish all of you a happy monsoon season.
Despite a slowing global recovery, growth is projected to be 3.3% in 2014 and 3.8% in 2015. Advanced economies are expected to see faster growth led by the US, while the eurozone recovery remains weak. Emerging markets face more divergence, with steady growth in Asia but slower growth in Latin America, Russia, and the Middle East. Short-term risks include worsening geopolitical tensions and reversals in financial markets.
- Global equity markets saw sharp corrections in January led by a steep fall in crude oil prices. The Nifty breached 7500 support level touching a 52-week low.
- Third quarter Indian company results were mixed, with some benefiting from lower commodities while banks may need more time to recover.
- The budget will be a key upcoming event, with the government expected to focus on rural spending, manufacturing, and fiscal reforms.
The Chinese currency, the Yuan, reached its lowest level against the dollar in five years in early January 2016 as Chinese policymakers pushed the currency lower through repeated devaluations to boost exports. This weakened the Yuan and fueled concerns about China's economy slowing more quickly than expected. A weaker Yuan could also drive the global economy closer to recession by reducing the purchasing power of the world's second largest economy. Other Asian economies that rely on exports to China may face pressure as their goods become more expensive to Chinese buyers. The devaluation also exacerbated declines in commodity prices and emerging market currencies. Overall the moves suggest China is struggling more than expected to transition from an export-led economy to one driven by domestic consumption and
The document provides an economic update and outlook for India. It notes that India's GDP growth was estimated at 4.8% for the last quarter, slightly higher than the previous quarter's revised rate of 4.7% but still below 5%. Industrial production grew by only 1.0% for the full fiscal year. Inflation rates have fallen, with WPI hitting a 41-month low of 4.89% in April. The RBI recently cut interest rates, citing lower inflation and slowing growth. However, the economic growth outlook remains cautious as investment activity remains subdued.
The document provides an overview and outlook of the Singapore residential property market in 2015. It finds that the market will likely remain weak in 2015, with private home prices expected to soften by 4-6% and HDB resale prices by 6-8%, due to three main factors: 1) the government is unlikely to ease property cooling measures as the market correction has not been significant enough; 2) there remains weak demand and massive upcoming supply, which could increase vacancy rates above 10%; and 3) the threat of rising interest rates from an expected US rate hike makes mortgages more expensive and lowers rental returns. The outlook paints a bleak picture for the residential market in 2015.
National Conference on “Infrastructure Finance – Building for Growth” - INDIA...Resurgent India
Indian economy after registering a robust growth of more than 9% during the period 2005-08, moderated to a growth of 6.7% in 2008-09 on the back of the global financial crisi
The document provides an overview of economic and market events from March 12-16, 2012. Key events included inflation data coming in slightly above expectations, the RBI holding interest rates steady and expressing concerns about inflation, and the Union Budget estimating a fiscal deficit of 5.1% for FY13. The budget increased excise and service tax rates, impacted sectors like oil & gas, pharma and autos, and provided some benefits to power, infrastructure and textiles. Market indices declined slightly over the week.
The document provides an overview and outlook on domestic and global financial markets. It discusses the CEO's positive outlook on the Indian equity market rally and fiscal reforms. On the domestic front, it summarizes inflation trends, industrial growth, bond yields, and provides recommendations on debt strategies. Globally, it reviews equity market performance and updates on major economies. The overall document aims to advise investors by analyzing economic and market conditions.
The RBI held interest rates steady against expectations due to concerns over seasonal food price inflation. The governor said rates may rise in 6 months if food inflation does not cool. US Federal Reserve began tapering bond purchases as expected due to strong economic growth. Indian IT and export sectors are expected to benefit from the recovery in the US economy. Bank earnings this quarter are forecast to improve over the last two quarters.
The RBI held interest rates steady against expectations due to concerns over seasonal food price inflation. The governor said rates may rise if food inflation does not cool in the next 6 months. Core CPI inflation of 8% is the key metric and may cool to 7-8% range. The US Federal Reserve began tapering bond purchases as expected due to strong economic growth and falling unemployment. Tapering is seen as positive for global and Indian growth, especially export sectors like IT. Earnings season begins in January with strong results expected from IT companies.
News:
DOMESTIC MACRO:
India's total external debt rose by $29.5 bn, or 6.6%, to $475.8 bn at the end of March 2015, mainly due to increase in external commercial borrowings and NRI deposits.
Fifteen states sign a memorandum of agreement (MoA) with the Ministry of Housing & Urban Poverty Alleviation for ‘housing for all’ mission in urban areas.
According to RBI’s annual report, the central bank remains focused on bringing down consumer inflation to its target of 4% by March 2018.
India to auction 20 major iron ore mines to revive industry.
GLOBAL MACRO
EURO
UK GDP rose by 2.6% annually in Q2 2015, compared to 2.9% in Q1.
UK GfK consumer confidence index jumped to 7 in August from 4 in July.
United States
US economy expanded 3.7% in Q2, higher than the previous estimate of 2.3%, and 0.6% growth in the first quarter.
US consumer spending increased 0.3% in July after an upwardly revised 0.3% rise in June while the personal income rose by 0.4% in July, matching the increase seen in the previous month.
US pending home sales index increased 0.5% after a revised 1.7% decline in June.
China
China’s industrial profits fell 2.9% year on year in July, sharply down from the 0.3% decline posted in June.
The document provides an economic update and outlook for India from the perspective of an advisory firm. It discusses positive developments in the domestic economy including higher than expected GDP growth in the first quarter and signs of recovery in industrial production. Inflation remains high but fuel prices are declining. The new government is pursuing reforms and the outlook is hopeful for continued economic revival. Globally, recovery is ongoing in the US and Eurozone which supports Indian markets, while falling oil prices are a major positive.
CII’s flagship monthly publication Economy Watch has been now revamped and rechristened as ‘Economy Matters’. Apart from encompassing all the key features of the old version, the new issue also carries a new section on Corporate Profitability to keep readers abreast about the latest trends in corporate performance. The ‘Economy Matters’ brought out by CII Research seeks to provide an in-depth update on current trends in the domestic and international economy and helps in tracking policy developments and understanding industry dynamics.
2016 to be a favorable year for India Ipos in Terms of Profit GrowthInvestmentz
This document discusses factors to consider when investing in Indian IPOs in 2016. It outlines positive factors such as expected recovery in corporate earnings growth, low inflation, efforts to improve business environment, and increased government spending. It also notes some risks, including monsoon conditions which impact rural demand, the government meeting its fiscal deficit target, uncertain global growth, and potential moves by the US Federal Reserve to raise interest rates. Overall, the prospects for profitable opportunities in Indian IPOs in 2016 are positive according to the document.
The document provides an overview of developments in the global and Indian economy and financial markets between March 11-15, 2013. It summarizes that Indian equity markets corrected by 1% last week after rising 4% the prior week. It also discusses the unprecedented tax on bank deposits in Cyprus to raise funds for its bailout. In India, inflation numbers rose while industrial output growth increased to 2.4% in January. The RBI was expected to cut interest rates to support growth.
The document provides a weekly summary of global and domestic economic and market conditions from May 06-10, 2013. Key points include:
- Global equity markets reached multi-year highs on expectations of strong economic recovery.
- US and Japanese data showed continued economic growth and aggressive monetary policies respectively.
- India's industrial production grew 2.5% in March, while inflation is expected to remain below targets.
- Most Indian indices rose over 1% last week with banking, consumer, and pharma sectors reporting strong earnings.
- Global markets are experiencing corrections due to concerns about the Chinese economy and an expected interest rate hike in the US. India's markets have fallen but volatility is expected to decrease as markets stabilize.
- India's industrial production grew slightly less than expected in July due to weakness in some sectors. Inflation data is expected to be released showing a rate between 3-4%.
- The document analyzes economic indicators and market performance in India and globally. It provides an outlook expecting the markets to remain stable with index movements within 5% over the next few months.
Similar to Indian Equities-Seeking Multi-year Alpha (20)
1. Indian Equities: Seeking
06 January 2015
What’s the Gist – While year 2014 saw markets rally on the back of hope
2015 brings an amazing opportunity for Investors in Indian equities to witness real revival of
the economy and participate in a multi
which I believe will play out over the next few years
portfolio with a goal of generating alpha consistently over the next 5 years.
Theme 1: Falling Inflation leads to Lowering
lately (CPI at 4.4% in Nov), largely due to easin
coupled with low IIP growth presents
Autos are the top picks among the sectors.
Theme 2: Revival in Economic activities leading to recovery in GDP
cut cycle begins, credit growth picks up which kick starts manufacturing and other economic
activities in an economy. Thus GDP growth revives.
Infrastructure, Cement and Capital goods among other.
Theme 3: Implementation of
government has been focused on bringing in new reforms and policies to get the economy
back on growth track. The government
amendment of Land acquisition bill,
Insurance FDI (Foreign Direct Investment) limit, GST (Goods and Sales tax) and Labour law
reforms are yet to be amended or approved. However, the government is likely to imp
majority of these reforms in the first half of its 5
benefited are the Power, integrated power producers for self use like steel, metals and
cement, Insurance companies and Industrial sector.
Theme 4: Global Commodities
economic growth remains sluggish as China (2
due to slowing investments and credit tightening. Euro zone economy remains fragile as they
continue to struggle to find way out of financial crisis hit back in 2008. However,
prices remaining low coup
global economy (ex China) is expected to gradually improve, which will see recovery in global
commodity prices as demand resumes.
Azharuddin A Mansiya
CFA Level 3 Candidate, June 2015
Phone: +91 9930307208
E-mail: a.a.mansiya@gmail.com
Indian Equities: Seeking Multi-year Alpha
While year 2014 saw markets rally on the back of hope
2015 brings an amazing opportunity for Investors in Indian equities to witness real revival of
the economy and participate in a multi-year bull market. This report discusses four themes
which I believe will play out over the next few years and accordingly have designed a model
portfolio with a goal of generating alpha consistently over the next 5 years.
Theme 1: Falling Inflation leads to Lowering of Interest rates – Inflation has been falling
lately (CPI at 4.4% in Nov), largely due to easing food prices. Recent slump in crude oil pric
coupled with low IIP growth presents a perfect case for RBI to cut interest rates. Banks and
Autos are the top picks among the sectors.
Revival in Economic activities leading to recovery in GDP
cut cycle begins, credit growth picks up which kick starts manufacturing and other economic
activities in an economy. Thus GDP growth revives. Prefer cyclical sectors including
Infrastructure, Cement and Capital goods among other.
e 3: Implementation of key government reforms and policies
government has been focused on bringing in new reforms and policies to get the economy
The government has already began with the coal blocks allocation and
dment of Land acquisition bill, While other major reforms like Mineral ore mining,
Insurance FDI (Foreign Direct Investment) limit, GST (Goods and Sales tax) and Labour law
reforms are yet to be amended or approved. However, the government is likely to imp
majority of these reforms in the first half of its 5-year tenure, I believe. Major sectors to get
benefited are the Power, integrated power producers for self use like steel, metals and
cement, Insurance companies and Industrial sector.
Commodities cycle recovers as global economy revives
economic growth remains sluggish as China (2nd
largest economy) continues to slowdown
due to slowing investments and credit tightening. Euro zone economy remains fragile as they
continue to struggle to find way out of financial crisis hit back in 2008. However,
prices remaining low coupled with easing of monetary policies by respective central banks,
global economy (ex China) is expected to gradually improve, which will see recovery in global
commodity prices as demand resumes. Sectors like metals and Oil & Gas will benefit.
While year 2014 saw markets rally on the back of hope of revival, year
2015 brings an amazing opportunity for Investors in Indian equities to witness real revival of
year bull market. This report discusses four themes
and accordingly have designed a model
portfolio with a goal of generating alpha consistently over the next 5 years.
Inflation has been falling
ecent slump in crude oil prices
cut interest rates. Banks and
Revival in Economic activities leading to recovery in GDP – As interest rate
cut cycle begins, credit growth picks up which kick starts manufacturing and other economic
Prefer cyclical sectors including
– The new Modi
government has been focused on bringing in new reforms and policies to get the economy
the coal blocks allocation and
hile other major reforms like Mineral ore mining,
Insurance FDI (Foreign Direct Investment) limit, GST (Goods and Sales tax) and Labour law
reforms are yet to be amended or approved. However, the government is likely to implement
year tenure, I believe. Major sectors to get
benefited are the Power, integrated power producers for self use like steel, metals and
as global economy revives – Global
largest economy) continues to slowdown
due to slowing investments and credit tightening. Euro zone economy remains fragile as they
continue to struggle to find way out of financial crisis hit back in 2008. However, with crude oil
led with easing of monetary policies by respective central banks,
global economy (ex China) is expected to gradually improve, which will see recovery in global
ectors like metals and Oil & Gas will benefit.
2. Indian Equities: Seeking Multi-year Alpha
Page 2 | Azharuddin A Mansiya 6 January 2015
Table of Content
1. Theme 1: Falling Inflation leads to Lowering Interest rates---------------------------03
2. Theme 2: Revival in Economic activities leading to recovery in GDP-------------06
3. Theme 3: Implementation of key government reforms and policies---------------09
4. Theme 4: Global Commodities cycle recovers as global economy revives-----10
5. Multi-year Alpha portfolio: Sectors------------------------------------------------------------13
3. Indian Equities: Seeking Multi-year Alpha
Page 3 | Azharuddin A Mansiya 6 January 2015
Theme 1: Falling Inflation leads to Lowering of Interest rates
As Inflation starts to ease… – Inflation, measured with CPI (Consumer Price Index) has been trending
downwards for past four months and it stands at 4.4% as of November 2014, which is within RBI’s
tolerance level. While this recent easing in inflation has largely been the result of lower food prices, recent
dramatic drop in crude oil prices have only accelerated the declining trend. As Global economy remains
fragile (Euro area struggling, Chinese economy cooling off), commodity prices including crude oil are
expected to remain weak in the near future. This will be beneficial for India as falling crude oil (used as
raw material in key products which also forms major component in CPI) will help to stabilize CPI at lower
levels.
Source: RBI
…probability of interest rate cut by RBI increases – RBI, who uses interest rates as one of the tools
to control inflation, has kept repo rate (the rate at which RBI lends to banks) at 8% since January 2014
after series of hikes in 2013. This has helped in controlling inflation to some extent, however it has come
at the cost of slowing growth of the economy. As illustrated in Exhibit 2, when inflation starts to ease, RBI
cuts interest rates with the lag of few months, however 2013 was an exception where despite high
inflation, RBI had reduced and kept rates lower due to slow economic growth (which was more like
stagflation) during the period.
With inflation now easing and growth struggling to resume, RBI is expected to cut rates sooner rather
than later, with earliest rate cuts expected post budget in 2015.
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
Jan12
Apr12
Jul12
Oct12
Jan13
Apr13
Jul13
Oct13
Jan14
Apr14
Jul14
Oct14
CPI
Exhibit 1: Inflation trend
4. Indian Equities: Seeking Multi-year Alpha
Page 4 | Azharuddin A Mansiya 6 January 2015
Source: RBI
As interest rates reduce, credit growth picks-up…. – Bank credit growth has been slowing since 2011
soon after repo rate hikes. As per the data published for September month by RBI, credit growth has
slowed down below 10% yoy for the first time in 5 years. As per Exhibit 3, credit growth has picked up
when rates have stayed below 7%. Slowing inflation rate and weak IIP growth presents a classic scenario
for RBI to cut rates to kick start credit growth and gradually the economic activities.
Source: RBI
7.0%
7.3%
7.5%
7.8%
8.0%
8.3%
8.5%
8.8%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
Jan12
Apr12
Jul12
Oct12
Jan13
Apr13
Jul13
Oct13
Jan14
Apr14
Jul14
Oct14
Reporate
CPI
Exhibit 2: Repo rate vs Inflation
CPI Repo rate
4.00%
4.75%
5.50%
6.25%
7.00%
7.75%
8.50%
9.25%
8%
13%
18%
23%
28%
33%
38%
43%
Apr01
Oct01
Apr02
Oct02
Apr03
Oct03
Apr04
Oct04
Apr05
Oct05
Apr06
Oct06
Apr07
Oct07
Apr08
Oct08
Apr09
Oct09
Apr10
Oct10
Apr11
Oct11
Apr12
Oct12
Apr13
Oct13
Apr14
Oct14
Reporate
Creditgrowth-3mma
Exhibit 3: Credit growth vs Repo rate
Creditgrowth Repo rate
5. Indian Equities: Seeking Multi-year Alpha
Page 5 | Azharuddin A Mansiya 6 January 2015
…leading with interest sensitive consumer loans – Auto demand, especially 4-wheelers is supported
by lower interest rates as consumers generally go for financing the purchase of their cars. As the below
chart suggests, auto loans pick-up when repo rates are reduced and vice versa. Auto loans were up in
October by 21% yoy, driven largely by festive demand. However, as rates are expected to be reduced in
near future, demand for autos will pick-up soon.
Source: RBI
Playing the theme – The first half of 2015 will see the start of interest rate cut cycle in the economy and
to play this trend I suggest taking exposure into Banking and Auto sector by investing regularly in the first
6 months to earn maximum returns. Banking and Auto stocks generally outperform broader market during
the interest rate cut cycle (Exhibit 5). Among banks, private sector banks are preferred due to better asset
quality and capitalization ratios. However, investors with high risk appetite can consider investing in public
sector banks (PSBs) as government works towards resolving their balance sheet issues beginning 2015.
Additionally, PSBs are trading at cheaper valuation than their private sector peers. Among the autos,
prefer to invest in 4-wheelers segment with domestic exposure followed by commercial vehicles. For retail
investors to play this trend, I suggest to take mutual fund route by investing in Bank and Auto sector/focus
funds. For conservative investors, investing in long-term debt funds is preferred over bank fixed deposits
and PPFs as the return generated will be far superior in debt funds.
Source: RBI, BSE India
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
Apr2008
Oct2008
Apr2009
Oct2009
Apr2010
Oct2010
Apr2011
Oct2011
Apr2012
Oct2012
Apr2013
Oct2013
Apr2014
Oct2014
Reporate
Autoloangrowth-3mma
Exhibit 4: Auto loans growth vs Repo rate
Auto loans Repo rate
6. Indian Equities: Seeking Multi-year Alpha
Page 6 | Azharuddin A Mansiya 6 January 2015
Theme 2: Revival in Economic activities
Falling interest rates encourage demand for loans… – Interest rates hold key to ignite engine of
growth in an economy. Presently RBI has kept repo rates constant at 8% since the start of 2014 which
has led to constant falling loan growth in manufacturing sector from the high of 33% yoy in Jan-2014
down to 18% yoy in Oct-2014. As interest rates starts to fall (as discussed in theme 1), demand for loans
to finance manufacturing activities will accelerate, as illustrated in exhibit 5.
Source: RBI
…leading to improvement in Industrial output – Index of Industrial Production (IIP) is an indicator used
to measure the combined economic output of the goods manufactured by various industries and sectors
in India. A higher IIP number indicates growth in economic activity supported by demand for goods
produced. While IIP growth is driven by the demand situation in the economy, credit growth in
manufacturing sector acts as a leading indicator of potential future growth in IIP output.
As indicated in exhibit 6, IIP improves with increasing loan growth, since manufacturers need finance to
create capacities for production and other operational needs. With credit growth poised to pick-up, IIP will
soon recover, improving the growth outlook in the economy.
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
0%
5%
10%
15%
20%
25%
30%
35%
Apr08
Oct08
Apr09
Oct09
Apr10
Oct10
Apr11
Oct11
Apr12
Oct12
Apr13
Oct13
Apr14
Oct14
Reporate
Loangrowth-3mmayoy
Exhibit 5 : Repo rate vs Manufacturing sector loans
Manufacturing sector loans Repo rate
7. Indian Equities: Seeking Multi-year Alpha
Page 7 | Azharuddin A Mansiya 6 January 2015
Source: RBI
Recovery in IIP will boost GDP – Gross Domestic Product (GDP) is a measure of total economic output
produced in form of physical goods as well as services in a country. It an indicator of overall growth
situation in a country. A strong IIP growth suggests eventual revival in overall economic growth improving
GDP growth. Historically, when IIP growth resumes, GDP growth revives almost simultaneously (Exhibit
7). As IIP growth is expected to bounce back, GDP revival will soon follow. However, the quantum of
growth will depend on interest rate cuts along with other macro-economic factors including government
reforms and global factors.
Source: RBI
0%
5%
10%
15%
20%
25%
30%
35%
-10%
-5%
0%
5%
10%
15%
Apr2008
Oct2008
Apr2009
Oct2009
Apr2010
Oct2010
Apr2011
Oct2011
Apr2012
Oct2012
Apr2013
Oct2013
Apr2014
Oct2014
Loangrowth-3mmayoy
IIP-3mmayoy
Exhibit 6: IIP vs Mfg sector loans
IIP Manufacturing sector loans
-10%
-5%
0%
5%
10%
15%
20%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
3Q14
1Q15
IIP-quarterly3mmayoy
GDP%
Exhibit 7: GDP growth vs IIP
GDP IIP
8. Indian Equities: Seeking Multi-year Alpha
Page 8 | Azharuddin A Mansiya 6 January 2015
Playing the theme – IIP growth resumes within 2 quarters while GDP takes 3 to 4 quarters to revive post
the first instance of meaningful rate cut. During this course of revival, core industrial sectors like capital
goods, consumer durables segment and construction activities will lead the recovery cycle. As consumer
spending gradually rises with improving GDP, consumption driven industries like food, clothing, travel,
entertainment and allied sectors will gather the growth momentum. For investors seeking to generate
alpha on their portfolios, it is advisable to remain overweight on capital goods, cement and consumer
durables sectors. Retail investors can best benefit by investing in mutual funds focused on these specific
sectors. The maximum alpha can be derived from this theme is by investing before the growth revives
and staying invested through the entire growth cycle.
Source: BSE India
9. Indian Equities: Seeking Multi-year Alpha
Page 9 | Azharuddin A Mansiya 6 January 2015
Theme 3: Implementation of Key Government Reforms and Policies
With new government comes new reforms… – Policy reforms are much needed to ensure that India
transitions out from stagflation to an environment of higher growth and lower inflation. Indeed, the
decisive (Lok Sabha) election outcome suggests that the new government will be able to implement
reforms at a faster than previously expected pace. Easing land acquisition rules, raising foreign
investment limits in insurance and pension sector, introducing a country-wide goods and services tax
(GST), privatization of coal sector and a separate labour law for small factories are few of the major
reforms the new government is looking to implement in its tenure.
…with new reforms comes new hurdles… – The government had lined up an ambitious legislative
agenda for the just concluded Parliament session. The long-pending insurance legislation to raise the cap
on foreign investment to 49 percent from 26 percent, and another bill to replace a decree to overhaul the
coal sector, were considered low-hanging fruits that PM. Modi hoped to push through parliament's winter
session, but it did not make much headway because of its lack of strength in the Rajya Sabha.
…and with new hurdles comes new solutions – After failing to see the key bills passed in Rajya
sabha, government is now likely to opt for the ordinance route to take some of that forward – insurance,
coal and mining. The Union budget is expected to provide a big push forward in terms of drawing up
framework for key policy reforms that the government is proposing to get the economy back on track. Two
things that they need to be pushed in 2015 are GST and revival of mining activity. These two are very
critical. Infrastructure sector needs a huge facelift.
Playing the theme – The new Modi government is focused on infrastructure development and economic
growth. In order to achieve this goal, the government has taken some steps in the right direction and are
looking more than willing and capable of achieving it. To this end, they have already laid the plan for
auctioning of coal mine blocks. Insurance FDI bill and Mining bill to auction iron ore mines will be cleared
ordinance route. GST (Goods and Sales tax) is also expected to be implemented as early as FY17. All
these reforms will improve the business conditions and fundamentals which in turn will improve their
productivity once the economy revives. The key sectors to benefit include Power, Metals, Insurance and
Manufacturing Industries. Investors are advised to begin investing in Metals and power, followed by core
industrial sectors.
Source: BSE India, RBI
10. Indian Equities: Seeking Multi-year Alpha
Page 10 | Azharuddin A Mansiya 6 January 2015
Theme 4: Global Commodities cycle recovers as global economy revives
China is dragging global growth down… – China’s slowdown is being led by a decline in spending on
infrastructure and housing. And, of course, if there is a slowdown in Chinese growth and demand for raw
materials and such, that's going to be another massive shake to the global economy.
…and Euro zone is further adding to the pain – With growth of just 0.2% in the third quarter of 2014
and an annual inflation rate of 0.3% in November, Eurozone problems of slowdown and deflation seems
to have prolonged their stay. With a backdrop of weak growth, low oil prices and general lack of
inflationary pressures, the ECB’s (European Central Bank) battle against deflation looks to continue well
into 2015.
However, lower Oil price helps stimulate demand… – In the summer of 2014, a barrel of Brent crude
was trading at $115 a barrel. By Christmas it could be obtained for barely half that price. The big drop in
the oil price is positive for global growth. It puts more spending power in the hands of consumers and it
cuts costs for businesses. Global growth should gradually pick up as lower Oil prices should be able to
tame inflation which in turn should enable central banks to ease monetary policy to stimulate growth.
However, this would affect governments, such as Russia, Venezuela and Iran, that can only balance
their books if the oil price is at $100 a barrel or more.
…which can be further nurtured through monetary measures… – ECB is expected to announce
further easing measures in form of QE in 2015 to stimulate demand. However, the recovery will be
gradual, probably after second half of 2016.
Rapid growth in China supported the world economy during the recession, but it was created on
investments and supported by debt, neither of which is healthy. The fact that fixed asset investment
growth dropped to 16.1% from 20% in 2013 while retail sales remained more or less stable (growth was
down by 1.3%), suggests that demand is finally beginning to catch up with supply. Indeed, consumption
now accounts for a record 48% of China’s GDP. This is really good news as China’s economy gradually
transitions away from investment driven to consumption driven and in the process, cuts down on public
debt.
…Leading to recovery in commodity prices – As Global economy growth recovers, demand for
commodities picks-up, driving their prices up. Rising commodity prices, especially crude oil will reverse
the inflation cycle, i.e. inflation will start to rise (refer exhibit 10, 11 and 12).
11. Indian Equities: Seeking Multi-year Alpha
Page 11 | Azharuddin A Mansiya 6 January 2015
Source: IMF
Source: IMF
0
20
40
60
80
100
120
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
CrudeOilpx(US$/bbl)
GDP(%)
Exhibit 10: World GDP vs Crude Oil
World Crude Oil
0
50
100
150
200
250
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
IMFWorldMetalsIndex
GDP(%)
Exhibit 11: World GDP vs Metals Prices
World IMF World Metals Index
12. Indian Equities: Seeking Multi-year Alpha
Page 12 | Azharuddin A Mansiya 6 January 2015
Source: IMF
Playing the theme – It will take couple of years before the global growth picks-up and I see this theme
playing out from 2017 onwards. As commodity prices start to recover supported by growth, inflation will
start moving upwards, prompting central banks to start tightening interest rates. In such a scenario,
commodity producing sectors and defensive sectors tend to outperform. Investors are advised to move
out of their long term debt investments and start increasing investments towards metals, oil&gas sectors,
followed by defensive sectors like Pharma and FMCG.
10
30
50
70
90
110
2.0
3.0
4.0
5.0
6.0
7.0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
CrudeOilpx(US$/bbl)
Inflation(%)
Exhibi 12: World Inflation vs Crude oil
World Crude Oil
13. Indian Equities: Seeking Multi-year Alpha
Page 13 | Azharuddin A Mansiya 6 January 2015
Multi-year Alpha Portfolio – Sectors
Year 2015 – Remain bullish on sectors like Autos, Banks and Consumer durables as I see onset of
theme 1 in the year 2015. Additionally, Cement is expected to outperform, as construction demand picks-
up due to infrastructure development in the country. Remain bearish on metals, oil & gas and steel
sectors due to global commodity downturn cycle.
Year 2016 – Remain bullish on sectors like Autos, Banks, Consumer durables, Capital goods and
Cement as theme 1 continues to play on along with the onset of theme 2 and partial visibility of benefits of
theme 3. Continue to remain bearish on metals, oil & gas and steel sectors due to global commodity
downturn cycle. Additionally, I believe FMCG sector will tend to underperform the cyclical sectors.
Year 2017 – Remain bullish on sectors like Autos, Banks, Capital goods, Cement, Infrastructure, Steel
and Power as Theme 2 plays out while benefits of theme 3 continues. Remain bearish on FMCG and
Pharma sector on their relative underperformance to cyclicals.
Year 2018 – Remain bullish on commodity linked sectors like Metals, Steel and Oil & Gas as Theme 4
plays out. Remain bearish on Cement and Power sector as they will be trading at or near peak of their
cycle.
Year 2019 – Remain bullish on defensive sectors like FMCG, IT and Pharma as Theme 4 continues to
play out and as the cyclical peak out. Remain bearish on all cyclical sectors as inflation rises, pushing
interest rates upward, slowing the credit growth.
Note: Overweight = Sector will outperform broader market (BSE Sensex), Neutral = Sector will perform in line with the broader
market and Underweight = Sector will underperform the broader market.
14. Indian Equities: Seeking Multi-year Alpha
Page 14 | Azharuddin A Mansiya 6 January 2015
Disclaimer: The views mentioned in this report are based purely on my own independent analysis, research and understanding.
None of the content including data and views are based on any of the research reports of any brokerage houses. Model portfolio
composition is dynamic in nature and is subject to change as per the changes in the macro-economic situations and risks
associated. Investors are requested to take advice before acting upon any investment ideas mentioned in this report.