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India Equity Research Reports, IPO and Stock News
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IF 2011 : Balanced outlook
At the CLSA Investor Forum 2011, 17 Indian corporates, representing
US$325bn in market cap met global investors with a packed schedule.
Corporates were balanced on the growth outlook with banks admitting to
a credit slowdown and a few corporate viz. Bharti, R Comm and DLF
focussing on balance sheet improvement. Consumer demand growth
stays robust for now and investor sentiments towards India appeared
divided. We remain cautious on the markets with more downside to
corporate earnings estimates. CLSA’s global strategy team, however,
retains India as one of its favourite markets given its lower export
dependence and RBI’s potential capacity to fight a potential deflationary
scare. M&M, ICICI Bank, ITC and Dr Reddy’s remain our top ideas.
Investors’ sentiments on India divided
While India dedicated investors were more negative about the corporate
earnings growth outlook, we believe that the multi country investors were
evaluating a re-entry strategy looking at the underperformance of the Indian
markets. While a global macro, would likely be the single biggest sentimental
driver for Indian equities in the short term flows; investors were concerned
about politics, slowdown in investment demand, continued inflationary
pressures and corporate earnings trend. We believe that a turnaround in
investor sentiments will be likely driven by potential easing of inflation / RBI
pausing and as and when corporate earnings estimates become more stable.
Investment Slowdown but consumer demand still robust
The six banking and financial institutions presenting at the forum, generally
agreed that the credit growth will like slowdown. IDFC management
highlighted that the new project conceptualisation has slowed down
considerably. With deposit growth likely to outstrip credit growth in 2HFY12
and with the rupee depreciation, ICICI Bank and HDFC Bank highlighted that
another RBI action (rate hike, CRR hike) can not be ruled out. On the other
hand, the consumer companies viz. ITC, United Spirits and Hindustan
Unilever pointed towards continued buoyancy in consumer demand. TCS
maintains its hiring targets and this trend should aid consumer demand.
Corporates focussed on lowering leverage
While none of the corporates sounded any alarm bell about the balance sheet
leverage level etc, select corporates viz. Reliance Communication and Bharti wish
to get the net debt / ebitda from 5x and c.3x to 2x before undertaking further
projects. DLF has also guided for the debt to come down by Rs30-40bn (from
Rs240bn currently) by Mar-12. DLF highlighted that the company is in advance
stages of negotiation and a part of this cashflow will be realised in 3QFY12 itself.
We remain cautious but India might outperform peers
We maintain our cautious stance on the markets, and maintain our U-WT
stance on banks (slower credit growth, asset quality pressures), industrials
(continued investment slowdown), utilities (coal shortage) and IT services
(global growth concerns impacting growth). We continue to believe that these
sectors and others will likely see more earnings downgrade and markets
unlikely to perform unless we stability on earnings. On the other hand, CLSA’s
macro and global strategists Russell Napier and Chris Wood like India on a
relative basis, thanks to India’s lower dependence on exports and the fact
that with a 350bps rate hike, the RBI has enough firepower to fight a
potential deflationary scare.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IF 2011 : Balanced outlook
At the CLSA Investor Forum 2011, 17 Indian corporates, representing
US$325bn in market cap met global investors with a packed schedule.
Corporates were balanced on the growth outlook with banks admitting to
a credit slowdown and a few corporate viz. Bharti, R Comm and DLF
focussing on balance sheet improvement. Consumer demand growth
stays robust for now and investor sentiments towards India appeared
divided. We remain cautious on the markets with more downside to
corporate earnings estimates. CLSA’s global strategy team, however,
retains India as one of its favourite markets given its lower export
dependence and RBI’s potential capacity to fight a potential deflationary
scare. M&M, ICICI Bank, ITC and Dr Reddy’s remain our top ideas.
Investors’ sentiments on India divided
While India dedicated investors were more negative about the corporate
earnings growth outlook, we believe that the multi country investors were
evaluating a re-entry strategy looking at the underperformance of the Indian
markets. While a global macro, would likely be the single biggest sentimental
driver for Indian equities in the short term flows; investors were concerned
about politics, slowdown in investment demand, continued inflationary
pressures and corporate earnings trend. We believe that a turnaround in
investor sentiments will be likely driven by potential easing of inflation / RBI
pausing and as and when corporate earnings estimates become more stable.
Investment Slowdown but consumer demand still robust
The six banking and financial institutions presenting at the forum, generally
agreed that the credit growth will like slowdown. IDFC management
highlighted that the new project conceptualisation has slowed down
considerably. With deposit growth likely to outstrip credit growth in 2HFY12
and with the rupee depreciation, ICICI Bank and HDFC Bank highlighted that
another RBI action (rate hike, CRR hike) can not be ruled out. On the other
hand, the consumer companies viz. ITC, United Spirits and Hindustan
Unilever pointed towards continued buoyancy in consumer demand. TCS
maintains its hiring targets and this trend should aid consumer demand.
Corporates focussed on lowering leverage
While none of the corporates sounded any alarm bell about the balance sheet
leverage level etc, select corporates viz. Reliance Communication and Bharti wish
to get the net debt / ebitda from 5x and c.3x to 2x before undertaking further
projects. DLF has also guided for the debt to come down by Rs30-40bn (from
Rs240bn currently) by Mar-12. DLF highlighted that the company is in advance
stages of negotiation and a part of this cashflow will be realised in 3QFY12 itself.
We remain cautious but India might outperform peers
We maintain our cautious stance on the markets, and maintain our U-WT
stance on banks (slower credit growth, asset quality pressures), industrials
(continued investment slowdown), utilities (coal shortage) and IT services
(global growth concerns impacting growth). We continue to believe that these
sectors and others will likely see more earnings downgrade and markets
unlikely to perform unless we stability on earnings. On the other hand, CLSA’s
macro and global strategists Russell Napier and Chris Wood like India on a
relative basis, thanks to India’s lower dependence on exports and the fact
that with a 350bps rate hike, the RBI has enough firepower to fight a
potential deflationary scare.
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