1. A TRYST WITH INDIA’S FINANCIAL MARKETS

2. A GLANCE THROUGH INDIA’S MARKET INDEX
Nifty nosedived in FY09 on account of the subprime crises
Historical median P/E for Nifty times forward for the above time period.
NIFTY was 27.8 times forward at its peak in January 2008.
P/B ratio as of June’19 is 3.77 while dividend yield is around 1.24 percent.

3. Corporate Earnings Private Capex THE TWO KEY FACTORS ON WHICH MARKETS
SHALL RE-RATE
Corporate Earnings
Private Capex

4. EARNINGS TO CAGR 14% FOR THE NEXT TWO YEARS
We are expecting 14-15% Earnings CAGR for Nifty for FY20 and FY21 as a BASE CASE
The BULL case earnings recovery can be 18-20%
EPS had clocked a CAGR of 25% pre subprime crisis, However growth rate declined to 10.2% from FY09-13 and further to 3.67% between FY14-19.

5. Private capex has declined 13 percent year on year basis.
Private sector capital expenditure (capex), which rose to Rs.3.7 trillion in , has witnessed a declining trend since last past seven years.
During private capex has declined to 1.5 trillion the lowest in last 11 years.
Private capex has declined 13 percent year on year basis.
Current overall utilization level stands at 75 percent.

6. DOMESTIC MACRO FACTORS AT PLAY

7. Q4 GDP GROWTH RATE LOWEST IN 4 YEARS

8. DOMESTIC SAVINGS TO GDP ON A UP-TREND
India's Gross Savings Rate was measured at 30.5 % in Mar 2018, compared with 30.3 % in the previous year. 

9. CURRENT ACCOUNT DEFICIT
Current account deficit has been falling Q-o-Q and has reached USD -6.9 bn as compared to bn in Sep’17.
CAD widens to 2.5 percent of GDP in third quarter.

10. GROSS FIXED CAPITAL FORMATION
GFCF has been revised downwards to 9.2 per cent for the current fiscal, from the earlier forecast of 10.3 per cent. Although the average 9.5 per cent investment growth during FY17-FY19 is quite healthy compared with the average 3.6 per cent GFCF growth over FY14-FY16,

11. MANUFACTURING PMI
India manufacturing sector grows at the fastest pace in three months for May’19 on account of improved output and new orders

12. EXTERNAL DEBT TO GDP
India’s external debt falls to USD bn due to decrease in commercial borrowings and NRI deposits
External debt/GDP ratio stands at 20.1 percent for 2018.

13. FOREX RESERVES
India's forex reserves comprise Foreign Currency Assets (FCAs), gold reserves, Special Drawing Rights (SDRs) and India's reserve position with the International Monetary Fund (IMF).
India’s forex reserves has declined from USD billion in Jan’19 to USD 3.96 billion in June’19.
Import cover has increased from 9 months in Oct’18 to 11 months in Feb’19.

14. FISCAL DEFICIT
Pertinent to note the Government strategy on the fiscal glide path and whether the 3.4% figure shall be held up.
Prudent measures on the capital account front and shoring up of Direct/Indirect tax revenues to be observed.

15. EXTERNAL FACTORS

16. EXTERNAL FACTORS
Rising crude oil prices could further increase imports and put pressure on India’s current account deficit on account of geo political tensions in the middle east.
The escalating trade war between the US and China, and rising protectionism have cast a shadow on India’s prospects for higher exports.

17. GLOBAL YIELD MOVEMENT
Treasury yields was rising for most parts of 2018 on account of US FED rising interest rates by four times in touching an high of ~3.1 percent.
However, the growth outlook looks gloomy for US as the tensions between US and China is not slowing down. A rate cut by US FED is likely on the cards in later half of 2019.
US Yield curve has already showed signs of inversion over the 3 month and 3 year US bonds.
German 10 Year bund yields have also turned negative in 2019.

18. US FED DOT PLOT
Source: CNBC

19. RBI INTEREST RATE TRAJECTORY
Source: Thomson Reuters

20. Published in FYI 2016. © Angel Broking 2018-19.
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