The 'vcts' framework indicates that current valuations are reasonable and suggests it's a good time to invest in equities, despite negative sentiments from foreign portfolio investors withdrawing funds. Key financial metrics reveal a market cycle bottom with a mixed performance in historical returns and growth rates. The framework aims to help navigate markets efficiently using various data points, and past performance may not be indicative of future results.

1. Did You Know?
Our ‘VCTS’ framework (Valuations, Cycle, Trigger, Sentiments) is currently indicating that
Valuations are reasonable, Business Cycle has bottomed out, Trigger would be the trajectory of
COVID-19 growth curve, Sentiments are negative since FPIs are withdrawing money and past
returns have been muted. This suggests that it is a good time to invest in equities
Parameters ('VCTS' Framework)
October January May
2008 2018 2020
‘V'aluations
Trailing P/E Nifty 50 12.57 27.5 22.38
Trailing P/B Nifty 50 2.42 3.73 2.73
Market Cap to GDP Ratio 54% 93% 65%
‘C'ycle
Capacity Utilisation (Oct-Dec 2019) 75.9% 75.2% 68.6%
Credit Growth (YoY as of May 8, 2020) 28.5% 11.0% 6.5%
‘S'entiments
Net FPI Flows (12 Months trailing in Rs. Cr) -52,410 66,210 -15,276
Nifty 50 Returns:
1 Year -51.1% 28.8% -19.6%
2 Year -12.2% 20.7% -5.5%
3 Year 6.8% 7.8% -0.1%
Nifty 50 EPS growth:
1 Year 9.7% 17.0% 17.5%
2 Year 18.5% 10.1% 4.1%
3 Year 18.8% 2.3% 7.1%
Macro Indicators
IIP (twelve months trailing) 3.9% 7.5% -16.7% (Mar 2020)
GDP Growth 5.8% 7.2% 4.2% (FY20)
USD/INR 49.3 63.6 75.6
Brent Crude (USD/Barrel) 65.3 69.1 35.3
G-Sec Yields
India 7.5% 7.4% 5.97%
USA 4.0% 2.7% 0.65%
Time period considered: October 2008 – Market fall post Global Financial Crisis (Low Valuations), January 2018 – Pre-NBFC & Pre- US-China crisis (Peak
Valuations), April 2020 – COVID-19 crisis (Reasonable Valuations). All data is as of April 30, 2020 unless stated otherwise. Source: NSE, BSE India,
NSDL, Reserve Bank of India, Edelweiss Securities, Kotak Securities, Axis Direct; P/E: Price to Earnings Ratio; P/B: Price to Book Ratio; CAGR: Compound
Annualised Growth Rate; YoY: Year on Year; FPI: Foreign Portfolio Investors; IIP: Index of Industrial Production; GDP: Gross Domestic Product, EPS –
Earnings Per Share. Returns & EPS growth mentioned are in CAGR terms. G-Sec yields are 10 year Govt. Bond Yields (6.45 GS 2029). Current Mcap to
GDP ratio is calculated assuming GDP would contract by 23% in Q1FY21 on a y-o-y basis from Q1FY20 (Edelweiss Research estimates have been used).
Past performance may or may not sustain in future.
VALUATIONS PERSPECTIVE

2. Did You Know?
The „VCTS‟ (Valuations, Cycle, Trigger, Sentiments) framework is a market checklist which can be used to
determine market valuations/conditions for investment at any given point in time. The framework can find
application across asset classes. It aims to navigate markets efficiently by reflecting on various data
points used in the framework.
PE – Price-to-Earnings; PBV – Price to Book Value Ratio; COVID-19 is Coronavirus disease 2019.
The information contained herein is only for the purpose of information and not for distribution and do not constitute an offer to buy or sell
or solicitation of any offer to buy or sell any securities or financial instruments in the United States of America (“US”) and/or Canada or for
the benefit of US persons (being persons falling within the definition of the term “US Person” under the US Securities Act, 1933, as
amended) or persons residing in Canada.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
ABOUT OUR ‘VCTS’ FRAMEWORK