Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
MSCI India (US$) lost a significant 12.5% over the month and
underperformed the MSCI Emerging markets index (down 9.2%).
Consumer Discretionary, Consumer Staples and Energy companies were
relative out performers, while Telecom, Utilities and IT Services
underperformed.
1Q FY12 GDP growth moderated, but still remains at healthy levels.
India’s Apr – June quarter GDP increased in-line with our expectation at
7.7% oya. Strong exports (24% oya) and a marginal pick up in
investment (7.9% oya) helped aggregate growth. Consumption growth
has moderated notably from 9.5% to 6.3% compared to 2Q CY10.
Inflation moderates. July headline inflation moderated to 9.2 % oya on
account of softening global commodity prices. The trend in core
inflation however remained worrisome and further accelerated to 7.5%.
June IP surprised positively. June IP grew at a significantly higherthan-
expected 8.8% oya. The positive surprise came from a sharp
rebound in the Capital goods segment.
DIIs buyers, FIIs sellers. FIIs were sellers over the month and sold US$
2,394 mn of Indian equities. DII however turned buyers over the month.
Insurance companies bought US$1,345 mn while domestic mutual funds
bought US$481 mn over the month.
Other key developments over the month:
INR depreciated by 3.6% vs. the US$ over August
Headline WPI Inflation for June reported at 9.2%.
10 year treasury yield softened 13 bps to 8.32% over
August
Equity review
MSCI India (US$) lost a significant 12.5% over the
month and underperformed the MSCI Emerging
markets index (down 9.2%). Global data points remained
choppy. The S&P downgrade of its US credit rating from
AAA to AA+ increased risk aversion among investors.
The widely anticipated speech by Fed Chairman Ben
Bernanke at Jackson Hole was largely in line with
expectations. On the domestic front, the trend of growth
moderation and sticky inflation continued. The policy
environment remained weak as the Government was
distracted in negotiations with the Civil society on a
more stringent anti corruption law. Social activist Anna
Hazare stopped his fast on the 12th day, after an
assurance from Parliament on the “Jan Lok Pal” bill.
Consumer Discretionary, Consumer Staples and Energy
were relative out performers.
Robust performances of two wheeler companies – Hero
Honda and Bajaj Auto - helped relative outperformance
of Consumer Discretionary sector. Two wheeler sales
tend to be relatively less impacted by a hike in interest
rates.
Consumer Staples, being a defensive sector,
outperformed a declining market. The monsoon this year
has been normal and should help rural demand.
Correction in global crude oil prices helped performance
of state-owned oil companies.
Telecom, Utilities and IT Services underperformed.
Company specific news flows led to underperformance
of the Telecom sector.
Substantial underperformance of ADAG group
companies – Reliance Infra and Reliance Power – drove
underperformance of Utilities sector.
Continued uncertainty on US and European economies
led to underperformance of the IT Services sector.
Foreign institutional investors (FIIs) turned net
sellers of Indian equities over the month. FIIs sold
US$2,394 mn over August. Over 2011 so far, FIIs have
been marginal net buyers of US$45 mn.
Domestic institutional investors (DIIs) were net
buyers over the month and sold US$1,826 mn of
Indian equities. Insurance companies bought US$ 1,345
mn, while Mutual funds bought US$481 mn over the
month. Over 2011 so far, insurance companies bought
US$3,643 mn and mutual funds have bought US$
1,229mn.
Earnings estimate and valuations
Cuts in earnings expectations. Consensus earnings
estimates for the broad market (MSCI India) were cut by
(2.8%) for FY12 (E) and (3.1%) for FY 13(E) over the
month. The street estimates earnings growth of 17% and
18% for FY12(E) and FY13(E) respectively.The breadth
of earnings revisions was negative.
Key event to watch for the month ahead
RBI credit policy review – 16th September
Monsoon session of parliament – 1st August to 9th Sept.
Progress of South-West monsoon.
Corporate news
Ban on iron ore mining in Karnataka post the Lokayukta
report. The report also impacted companies named in the
report on irregular practices.
The Cabinet Committee on Economic Affairs approved
disinvestment of 5% of the paid up equity in Bharat
Heavy Electricals Limited (BHEL).
Hero Honda name changed to Hero Motocorp Ltd.
1Q FY12 earnings season concluded. Aggregate earnings
growth for the Sensex companies at 11% was helped by
global sectors. Companies across sectors reported margin
pressure.
RBI announced draft guidelines for new bank licenses.
RBI also published a working group report on regulating
NBFCs.
Economic and political review
2Q11 GDP (1Q of the fiscal year 2011-12) printed at
7.7% oya in line with our expectation. GDP growth, on
the production side, continued to be driven by services
which printed at 10% oya, despite a high base from the
previous year. Specifically, trade, transport and
communications services, which have exhibited buoyant
growth over the last few quarters, continued to remain
strong, printing at 12.8% oya. Financial and business
services also continued to display buoyant growth,
printing at 9.1% oya. Community and social services (a
proxy for government spending) expectedly printed
lower at 5.6% oya reflecting the fiscal consolidation. In
contrast to buoyant services growth, industrial growth
slowed to 5.1% oya, primarily on account of
construction. Manufacturing growth printed at 7.2% oya,
broadly in line with IP growth, but construction growth
plunged to 1.2% oya, suggesting that the rate hikes have
begun to bite significantly in this sector. Growth in
mining continued to languish (1.7 % oya) plagued by
governance and regulatory issues.
Headline inflation printed at 9.2 %oya in July slightly
below our expectations (Consensus: 9.2 % oya, J.P.
Morgan 9.4 %) and moderated compared to the 9.4 %
print the previous month. That said, core inflation rose to
7.5 % oya – its highest rate in four months. The
moderation in the July headline print was driven, in large
part, by the sustained moderation of “non-food primary
articles” whose rate of inflation fell to 15.5 % oya in July
(-2.9 % m/m, sa) down from almost 27% a few months
ago. This sub-group of the index most directly reflects
changes in global commodity prices and its moderation
over the last few months reflects the softening of global
commodity prices from their April highs. However, nonfood
manufacturing inflation – a proxy for core inflation
and something that is closely monitored by the RBI as a
sign of demand pressures in the economy – continued to
tick up. Specifically, core inflation for July (unrevised)
printed at 7.5 %oya up from 7.2 % the previous month
and even higher than the revised prints of 7.3 %and 7%
observed in May and April, respectively.
10-year benchmark treasury yield softened by 13 bps
to 8.32% over the month. This could be largely
attributed to increased concerns on global growth and
expectations of easing commodity prices.
INR depreciated by 3.6% vs. the US$ over the month.
This could be on account of meaningful portfolio
outflows.
India’s foreign currency reserve increased marginally
to US$285 billion.
Other News
June IP surprises sharply on the upside as capital good rebound
strongly
June IP surprised sharply on the upside, printing at 8.8 % oya (2.6 % m/m, sa)
significantly higher than consensus expectations of 5.5%oya. The surprise was driven
by a sharp rebound in capital goods (37.7 % oya, 13.8 % m/m, sa) which had
declined sequentially for the last two months. Given the lumpiness of capital goods
production, some rebound had been expected, but the magnitude of the rebound was
surprising given an increasingly widespread belief that the economy is slowing
sharply and the investment momentum has abated even further in recent months.
At a broader level, however, the rebound in IP is not surprising given that
manufacturing export growth has surged in recent months and non-oil import has
picked up sharply, suggesting the demand slowdown is being slightly overstated (see
details below). Given that manufacturing exports constitute an increasing fraction of
manufacturing output, the divergence between exports and IP was surprising over the
last two months, suggesting that an inventory drawdown was likely at play. That
phenomenon, however, seems to be over with IP rebounding as exports continue to
surge and there are no tangible signs as yet that softening global demand has
materially impacted India’s export sector.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
MSCI India (US$) lost a significant 12.5% over the month and
underperformed the MSCI Emerging markets index (down 9.2%).
Consumer Discretionary, Consumer Staples and Energy companies were
relative out performers, while Telecom, Utilities and IT Services
underperformed.
1Q FY12 GDP growth moderated, but still remains at healthy levels.
India’s Apr – June quarter GDP increased in-line with our expectation at
7.7% oya. Strong exports (24% oya) and a marginal pick up in
investment (7.9% oya) helped aggregate growth. Consumption growth
has moderated notably from 9.5% to 6.3% compared to 2Q CY10.
Inflation moderates. July headline inflation moderated to 9.2 % oya on
account of softening global commodity prices. The trend in core
inflation however remained worrisome and further accelerated to 7.5%.
June IP surprised positively. June IP grew at a significantly higherthan-
expected 8.8% oya. The positive surprise came from a sharp
rebound in the Capital goods segment.
DIIs buyers, FIIs sellers. FIIs were sellers over the month and sold US$
2,394 mn of Indian equities. DII however turned buyers over the month.
Insurance companies bought US$1,345 mn while domestic mutual funds
bought US$481 mn over the month.
Other key developments over the month:
INR depreciated by 3.6% vs. the US$ over August
Headline WPI Inflation for June reported at 9.2%.
10 year treasury yield softened 13 bps to 8.32% over
August
Equity review
MSCI India (US$) lost a significant 12.5% over the
month and underperformed the MSCI Emerging
markets index (down 9.2%). Global data points remained
choppy. The S&P downgrade of its US credit rating from
AAA to AA+ increased risk aversion among investors.
The widely anticipated speech by Fed Chairman Ben
Bernanke at Jackson Hole was largely in line with
expectations. On the domestic front, the trend of growth
moderation and sticky inflation continued. The policy
environment remained weak as the Government was
distracted in negotiations with the Civil society on a
more stringent anti corruption law. Social activist Anna
Hazare stopped his fast on the 12th day, after an
assurance from Parliament on the “Jan Lok Pal” bill.
Consumer Discretionary, Consumer Staples and Energy
were relative out performers.
Robust performances of two wheeler companies – Hero
Honda and Bajaj Auto - helped relative outperformance
of Consumer Discretionary sector. Two wheeler sales
tend to be relatively less impacted by a hike in interest
rates.
Consumer Staples, being a defensive sector,
outperformed a declining market. The monsoon this year
has been normal and should help rural demand.
Correction in global crude oil prices helped performance
of state-owned oil companies.
Telecom, Utilities and IT Services underperformed.
Company specific news flows led to underperformance
of the Telecom sector.
Substantial underperformance of ADAG group
companies – Reliance Infra and Reliance Power – drove
underperformance of Utilities sector.
Continued uncertainty on US and European economies
led to underperformance of the IT Services sector.
Foreign institutional investors (FIIs) turned net
sellers of Indian equities over the month. FIIs sold
US$2,394 mn over August. Over 2011 so far, FIIs have
been marginal net buyers of US$45 mn.
Domestic institutional investors (DIIs) were net
buyers over the month and sold US$1,826 mn of
Indian equities. Insurance companies bought US$ 1,345
mn, while Mutual funds bought US$481 mn over the
month. Over 2011 so far, insurance companies bought
US$3,643 mn and mutual funds have bought US$
1,229mn.
Earnings estimate and valuations
Cuts in earnings expectations. Consensus earnings
estimates for the broad market (MSCI India) were cut by
(2.8%) for FY12 (E) and (3.1%) for FY 13(E) over the
month. The street estimates earnings growth of 17% and
18% for FY12(E) and FY13(E) respectively.The breadth
of earnings revisions was negative.
Key event to watch for the month ahead
RBI credit policy review – 16th September
Monsoon session of parliament – 1st August to 9th Sept.
Progress of South-West monsoon.
Corporate news
Ban on iron ore mining in Karnataka post the Lokayukta
report. The report also impacted companies named in the
report on irregular practices.
The Cabinet Committee on Economic Affairs approved
disinvestment of 5% of the paid up equity in Bharat
Heavy Electricals Limited (BHEL).
Hero Honda name changed to Hero Motocorp Ltd.
1Q FY12 earnings season concluded. Aggregate earnings
growth for the Sensex companies at 11% was helped by
global sectors. Companies across sectors reported margin
pressure.
RBI announced draft guidelines for new bank licenses.
RBI also published a working group report on regulating
NBFCs.
Economic and political review
2Q11 GDP (1Q of the fiscal year 2011-12) printed at
7.7% oya in line with our expectation. GDP growth, on
the production side, continued to be driven by services
which printed at 10% oya, despite a high base from the
previous year. Specifically, trade, transport and
communications services, which have exhibited buoyant
growth over the last few quarters, continued to remain
strong, printing at 12.8% oya. Financial and business
services also continued to display buoyant growth,
printing at 9.1% oya. Community and social services (a
proxy for government spending) expectedly printed
lower at 5.6% oya reflecting the fiscal consolidation. In
contrast to buoyant services growth, industrial growth
slowed to 5.1% oya, primarily on account of
construction. Manufacturing growth printed at 7.2% oya,
broadly in line with IP growth, but construction growth
plunged to 1.2% oya, suggesting that the rate hikes have
begun to bite significantly in this sector. Growth in
mining continued to languish (1.7 % oya) plagued by
governance and regulatory issues.
Headline inflation printed at 9.2 %oya in July slightly
below our expectations (Consensus: 9.2 % oya, J.P.
Morgan 9.4 %) and moderated compared to the 9.4 %
print the previous month. That said, core inflation rose to
7.5 % oya – its highest rate in four months. The
moderation in the July headline print was driven, in large
part, by the sustained moderation of “non-food primary
articles” whose rate of inflation fell to 15.5 % oya in July
(-2.9 % m/m, sa) down from almost 27% a few months
ago. This sub-group of the index most directly reflects
changes in global commodity prices and its moderation
over the last few months reflects the softening of global
commodity prices from their April highs. However, nonfood
manufacturing inflation – a proxy for core inflation
and something that is closely monitored by the RBI as a
sign of demand pressures in the economy – continued to
tick up. Specifically, core inflation for July (unrevised)
printed at 7.5 %oya up from 7.2 % the previous month
and even higher than the revised prints of 7.3 %and 7%
observed in May and April, respectively.
10-year benchmark treasury yield softened by 13 bps
to 8.32% over the month. This could be largely
attributed to increased concerns on global growth and
expectations of easing commodity prices.
INR depreciated by 3.6% vs. the US$ over the month.
This could be on account of meaningful portfolio
outflows.
India’s foreign currency reserve increased marginally
to US$285 billion.
Other News
June IP surprises sharply on the upside as capital good rebound
strongly
June IP surprised sharply on the upside, printing at 8.8 % oya (2.6 % m/m, sa)
significantly higher than consensus expectations of 5.5%oya. The surprise was driven
by a sharp rebound in capital goods (37.7 % oya, 13.8 % m/m, sa) which had
declined sequentially for the last two months. Given the lumpiness of capital goods
production, some rebound had been expected, but the magnitude of the rebound was
surprising given an increasingly widespread belief that the economy is slowing
sharply and the investment momentum has abated even further in recent months.
At a broader level, however, the rebound in IP is not surprising given that
manufacturing export growth has surged in recent months and non-oil import has
picked up sharply, suggesting the demand slowdown is being slightly overstated (see
details below). Given that manufacturing exports constitute an increasing fraction of
manufacturing output, the divergence between exports and IP was surprising over the
last two months, suggesting that an inventory drawdown was likely at play. That
phenomenon, however, seems to be over with IP rebounding as exports continue to
surge and there are no tangible signs as yet that softening global demand has
materially impacted India’s export sector.
No comments:
Post a Comment