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India Equity Research Reports, IPO and Stock News
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Ample liquidity was on the offer by global central banks in February with
BoJ, BoE, and ECB announcing QE programs. The much awaited second
tranche of ECB’s LTRO met with tremendous response from EU banks but
global markets were muted as asset prices had run‐up in anticipation.
Meanwhile, the domestic growth faltered in Q3FY12 although recent
sequential trends in IIP, exports and PMI suggest that economy is
gradually emerging from extremely weak phase of May‐Oct 2011. On
monetary side, unusually high liquidity deficit is a reflection of weak
reserve money growth and CRR cut is becoming a certainty. On the
valuations front, Indian markets are trading at fair levels, with downgrade
cycle bottoming out.
Global economy: Outburst of liquidity
February saw major central banks‐ BoE, BoJ and ECB ‐announcing quantitative easing
programs. The much awaited second tranche of ECB’s LTRO saw 800 banks tapping
~EUR529bn of 3‐year funds. While LTRO has certainly helped boost liquidity and has
taken the immediate tail risks off the table, it has not made any material
improvement in the real economy. Also, we believe that LTRO‐2 will have a
diminishing impact given the sharp increase in asset prices in the run‐up to the event.
Indian economy: Growth slows down
GDP growth slowed to ~6.1% YoY in Q3FY12 (against 6.9% in Q2FY12), led by very weak
investment activity. However, sequential momentum in high frequency indicators – IIP,
PMI, exports suggests that economic activity may be picking up gradually, although
nature of the uptick in economic activity will much depend on the fiscal consolidation in
FY13, pace of reversal in monetary policy and progress on the policy front.
Liquidity: Deficit at elevated levels
Throughout February, LAF borrowing remained at elevated levels before hitting all time
high of INR1,900bn at one point. We think the primary reason for liquidity shortfall has
been the very slow growth in reserve money, partly reflecting sizeable FX intervention
by RBI to check INR fall. Liquidity conditions have eased in last couple of days but
pressure is likely to persist, particularly with advance tax outflows coming in next
couple of weeks. Accordingly, CRR cut is becoming a certainty.
Valuations: At fair levels, downgrades decelerate
After a scorching January, Indian markets took a breather in February. Net foreign
inflows came in at USD7.1bn‐ the strongest ever on record for the first two months in a
year. Valuations, meanwhile continue to trade at fair levels, both on absolute and
relative basis. Earnings downgrade cycle seems to be stabilizing with just a little over
1% cut in Sensex EPS estimates in CY12 so far.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Ample liquidity was on the offer by global central banks in February with
BoJ, BoE, and ECB announcing QE programs. The much awaited second
tranche of ECB’s LTRO met with tremendous response from EU banks but
global markets were muted as asset prices had run‐up in anticipation.
Meanwhile, the domestic growth faltered in Q3FY12 although recent
sequential trends in IIP, exports and PMI suggest that economy is
gradually emerging from extremely weak phase of May‐Oct 2011. On
monetary side, unusually high liquidity deficit is a reflection of weak
reserve money growth and CRR cut is becoming a certainty. On the
valuations front, Indian markets are trading at fair levels, with downgrade
cycle bottoming out.
Global economy: Outburst of liquidity
February saw major central banks‐ BoE, BoJ and ECB ‐announcing quantitative easing
programs. The much awaited second tranche of ECB’s LTRO saw 800 banks tapping
~EUR529bn of 3‐year funds. While LTRO has certainly helped boost liquidity and has
taken the immediate tail risks off the table, it has not made any material
improvement in the real economy. Also, we believe that LTRO‐2 will have a
diminishing impact given the sharp increase in asset prices in the run‐up to the event.
Indian economy: Growth slows down
GDP growth slowed to ~6.1% YoY in Q3FY12 (against 6.9% in Q2FY12), led by very weak
investment activity. However, sequential momentum in high frequency indicators – IIP,
PMI, exports suggests that economic activity may be picking up gradually, although
nature of the uptick in economic activity will much depend on the fiscal consolidation in
FY13, pace of reversal in monetary policy and progress on the policy front.
Liquidity: Deficit at elevated levels
Throughout February, LAF borrowing remained at elevated levels before hitting all time
high of INR1,900bn at one point. We think the primary reason for liquidity shortfall has
been the very slow growth in reserve money, partly reflecting sizeable FX intervention
by RBI to check INR fall. Liquidity conditions have eased in last couple of days but
pressure is likely to persist, particularly with advance tax outflows coming in next
couple of weeks. Accordingly, CRR cut is becoming a certainty.
Valuations: At fair levels, downgrades decelerate
After a scorching January, Indian markets took a breather in February. Net foreign
inflows came in at USD7.1bn‐ the strongest ever on record for the first two months in a
year. Valuations, meanwhile continue to trade at fair levels, both on absolute and
relative basis. Earnings downgrade cycle seems to be stabilizing with just a little over
1% cut in Sensex EPS estimates in CY12 so far.
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