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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strategy
Exploring the money trail. Our analysis of exports from India and FII inflows into India
in FY2011 shows wide gaps between reported official and bottom-up data. We
attribute this to data limitations partly but highlight that a better understanding of the
nature and type of exports and foreign inflows is critical (1) to fully appreciate the
drivers of exports and implications for BOP, reserves and exchange rate and (2) to
mitigate risks to the India economy from illicit ‘foreign’ flows, if any.
Difficult to explain surge in exports of engineering goods in FY2011 and the few prior years
Our study of exports data of major engineering companies (including automobiles and metals)
shows that the increase in their exports does not reconcile with the steep increase in official
exports data. In fact, the gap is quite substantial. Reported exports of engineering goods as per
official data jumped 79% yoy (US$30 bn) to US$68 bn in FY2011. On the other hand, exports of
the ‘engineering’ companies in the BSE-500 Index increased 11% yoy to `638 bn in FY2011 from
`577 bn in FY2010. Our observation holds true for the past few years too.
Difficult to explain surge in FII inflows in FY2011
Our bottom-up study of flows of FII funds and ETFs does not reconcile with the reported US$22 bn
of FII inflows in FY2011. At best, we can account for US$4.5 bn of FII flows based on data of listed
FIIs, ETFs and estimates of EPFR Global. We admit that EPFR Global data does not capture all the
sources of foreign institutional investment (sovereign and private equity funds, for example) that
can invest in India. Nonetheless, the difference is stark.
A few examples of remarkable growth in exports; hard to reconcile with publicly available data
A study of official exports data shows remarkable growth in two areas in the broad category of
engineering goods—(1) metal and metal products and (2) transport equipment. Exports of copper
cathodes grew 444% to `317 bn in FY2011 and was the key driver of US$17 bn growth in
exports in metal products. Similarly, a huge jump in exports of cars, drilling rigs and unclassified
ships accounted for the major portion of the US$9 bn increase in exports of transport equipment.
We didn’t see the same growth in exports of large listed companies.
Looking for credible explanations; better and more disclosures imperative
The gap between the surge in exports as per official data and a more muted performance of the
listed entities would suggest that (1) exports are largely being driven by smaller listed players or
unlisted entities or (2) the quality of data is suspect. We would like to believe credible explanations
exist for the aforementioned gaps with respect to (1) exports from India and (2) FII inflows into
India.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strategy
Exploring the money trail. Our analysis of exports from India and FII inflows into India
in FY2011 shows wide gaps between reported official and bottom-up data. We
attribute this to data limitations partly but highlight that a better understanding of the
nature and type of exports and foreign inflows is critical (1) to fully appreciate the
drivers of exports and implications for BOP, reserves and exchange rate and (2) to
mitigate risks to the India economy from illicit ‘foreign’ flows, if any.
Difficult to explain surge in exports of engineering goods in FY2011 and the few prior years
Our study of exports data of major engineering companies (including automobiles and metals)
shows that the increase in their exports does not reconcile with the steep increase in official
exports data. In fact, the gap is quite substantial. Reported exports of engineering goods as per
official data jumped 79% yoy (US$30 bn) to US$68 bn in FY2011. On the other hand, exports of
the ‘engineering’ companies in the BSE-500 Index increased 11% yoy to `638 bn in FY2011 from
`577 bn in FY2010. Our observation holds true for the past few years too.
Difficult to explain surge in FII inflows in FY2011
Our bottom-up study of flows of FII funds and ETFs does not reconcile with the reported US$22 bn
of FII inflows in FY2011. At best, we can account for US$4.5 bn of FII flows based on data of listed
FIIs, ETFs and estimates of EPFR Global. We admit that EPFR Global data does not capture all the
sources of foreign institutional investment (sovereign and private equity funds, for example) that
can invest in India. Nonetheless, the difference is stark.
A few examples of remarkable growth in exports; hard to reconcile with publicly available data
A study of official exports data shows remarkable growth in two areas in the broad category of
engineering goods—(1) metal and metal products and (2) transport equipment. Exports of copper
cathodes grew 444% to `317 bn in FY2011 and was the key driver of US$17 bn growth in
exports in metal products. Similarly, a huge jump in exports of cars, drilling rigs and unclassified
ships accounted for the major portion of the US$9 bn increase in exports of transport equipment.
We didn’t see the same growth in exports of large listed companies.
Looking for credible explanations; better and more disclosures imperative
The gap between the surge in exports as per official data and a more muted performance of the
listed entities would suggest that (1) exports are largely being driven by smaller listed players or
unlisted entities or (2) the quality of data is suspect. We would like to believe credible explanations
exist for the aforementioned gaps with respect to (1) exports from India and (2) FII inflows into
India.
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