WWRR Vol.2.017

More documents

Recommendations

Info

YOY increase in FED balance sheet Mar-95 Jun-96 Sep-97 Dec-98 Mar-00 Jun-01 Sep-02 Dec-03 Mar-05 Jun-06 Sep-07 Dec-08 Mar-10 Jun-11 Sep-12 Dec-13 Mar-15 Jun-16 Sep-17 Dec-18 Consumer prices inflation in % CY00 CY01 CY02 CY03 CY04 CY05 CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 India Strategy Note | January 1, 2019 relationship between Saudi Arabia and Petrodollar-driven US diplomacy drove most of the economics in the two decades that followed. The US emerged from the recession after the Lehman crisis and without inflation, only because the world funded the US’s fiscal deficit. If that changes in the coming years (and this is happening slowly), the markets are bound to be volatile. We advise shunning anything that drives revenue from US discretionary spending. We also believe that the best of the commodities is over. Although in a bubble valuation zone, consumption may still do well in CY19, in our view. Post Lehman crisis and unprecedented monetary expansion, people feared inflation but it never materialised… Figure 15: Post Lehman, there was unprecedented balance sheet expansion by the Federal Reserve 100.0% 80.0% Figure 16: Economists feared inflation but it never materialised as the world led by China purchased dollars 4.50 4.00 3.50 60.0% 40.0% 20.0% 0.0% 3.00 2.50 2.00 1.50 1.00 0.50 0.00 -0.50 -20.0% -1.00 SOURCES: CIMB RESEARCH, Bloomberg SOURCES: CIMB RESEARCH, Bloomberg However, with the potential decline in the demand for US$, the US has to control its fiscal situation which may not be great news for US$ bulls The US has invested close to US$6tr in its “war against terror” (Please see the link here). The bulk of the deficit in the past few years may be the result of this costly war on terror and hence, the need to pull back from these costly battlefields. However, the fields the US is vacating may be taken over by Russia and China, both of whom are signing agreements with potential buyers of their crude/trade/military hardware in Chinese yuan and Russian rouble. The net impact is that the US$ is slowly but steadily losing its trade dominance. If the US fiscal deficit is not controlled quickly, then much against the wishes of President Trump, the Fed may have no choice but to keep raising rates. The coming years are going to be extremely volatile for Indian equities While domestic flows into equities have increased over the years, the emerging markets remain susceptible to what happens in the US. We believe Indian markets are going to be volatile in the coming years, as: ● Global markets will remain volatile; ● Given the near-term turbulence, currency is bound to remain volatile; and ● The upcoming elections could lead to political risks. We believe the market does not care which political party wins the election, it needs stability. As such, if a coalition with different political beliefs wins the election, it will be negative for Indian equities. Indian market’s (NIFTY) valuations are neither cheap nor very costly, compared to recent history 7
Metal index P/ B ratio Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Jan-12 Sep-17 Apr-12 Jan-18 Jul-12 May-18 Oct-12 Sep-18 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Jan-12 Apr-14 May-12 Jul-14 Sep-12 Jan-13 Oct-14 May-13 Jan-15 Sep-13 Apr-15 Jan-14 Jul-15 May-14 Oct-15 Sep-14 Jan-16 Jan-15 Apr-16 May-15 Jul-16 Sep-15 Oct-16 Jan-16 Jan-17 May-16 Apr-17 Sep-16 Jul-17 Jan-17 Oct-17 May-17 Jan-18 Sep-17 Apr-18 Jan-18 Jul-18 May-18 Oct-18 Sep-18 India Strategy Note | January 1, 2019 Figure 17: Nifty is neither cheap nor very costly vis-à-vis last 7 years’ valuations 24.0 Nifty Best_P/E Average +1 Stdev -1 Stdev +2 Stdev -2 Stdev 22.0 20.0 18.0 16.0 14.0 12.0 10.0 Figure 18: Metal index valuation is near historical average; however, it will go down as analysts cut their earnings estimates 2.30 2.10 1.90 1.70 BEST_PX_BPS_RATIO Average +1 Stdev -1 Stdev +2 Stdev -2 Stdev SOURCES: CGS-CIMB RESEARCH, Bloomberg While metal index valuations are at reasonable levels, FMCG index is continuing its gravity defying moves Figure 19: On the other hand, FMCG index is continuing its gravity defying moves and is trading well beyond +2 s.d. of its long-term mean 45.00 40.00 BEST _ PE ratio Average +1 Stdev Title: -1 Stdev +2 Stdev -2 Stdev Source: Please fill in the values above to have them entered in your 1.50 1.30 1.10 0.90 0.70 0.50 35.00 30.00 25.00 20.00 SOURCES: CGS-CIMB RESEARCH, Bloomberg SOURCES: CGS-CIMB RESEARCH, Bloomberg IT index may look attractive but we advise staying away from the sector given the uncertainty around US policy; Overweight oil marketing companies 8
Page 1 and 2:
• • • • • • • • •
Page 3 and 4:
Dec-03 Dec-04 Dec-05 Dec-06 Dec-07
Page 5 and 6:
Strategy India Exhibit 5: Almost 40
Page 7 and 8:
Strategy India Exhibit 10: BJP won
Page 9 and 10:
Strategy India Exhibit 13: We recom
Page 11 and 12:
Portfolio Strategy We continue to b
Page 13 and 14:
Assessing the Cycle - 2019 in Bette
Page 15 and 16:
The share of profits in GDP or prof
Page 17 and 18:
FPI flows have also made a cycle lo
Page 19 and 20:
1/4/2019 The impact on India's econ
Page 21 and 22:
Page 23 and 24:
Page 25 and 26:
THE INVESTMENT OUTLOOK FOR 2019: LA
Page 27 and 28:
Page 29 and 30:
Page 31 and 32:
Page 33 and 34:
Page 36:
Agenda 01 02 03 04 05 Retail Credit
Page 40:
Retail Credit Growth- 2-year CAGR o
Page 44:
Retail-NBFC Credit Break-up- Share
Page 48:
Liquidity Impact on Growth 8
Page 52:
Conditions in H1FY2019-II Exhibit 8
Page 56:
Mar-15 Mar-16 Mar-17 Mar-18 Sep-18
Page 60:
Asset Class Wise Growth and Outlook
Page 64:
Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
Page 68:
Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
Page 72: Asset Quality Trends
Page 76: Mar-15 Mar-16 Jun-16 Sep-16 Dec-16
Page 80: Asset Quality- Challenges set to re
Page 84: Jun-15 Sep-15 Dec-15 Mar-16 Jun-16
Page 88: Mar-15 Mar-16 Mar-17 Mar-18 Sep-18
Page 91 and 92: Christopher Wood christopher.wood@c
Page 105 and 106: 1/4/2019 The struggle for India’s
Page 107 and 108: 1/4/2019 The struggle for India’s
Page 109 and 110: Navigating 2019 Surprises for 2019?
Page 111 and 112: Navigating 2019 Svalbard, Norway. C
Page 113 and 114: Equities Oslo, Norway. Ole Jørgen
Page 115 and 116: Equities Emerging market equities C
Page 117 and 118: CY60 CY63 CY66 CY69 CY72 CY75 CY78
Page 119 and 120: % of Reserve % of Trade in USD 2004
Page 121: illion US$ US$ bn India Strategy No
Page 125 and 126: Jan-12 Apr-12 Jul-12 Oct-12 Jan-13
Page 127: economists expanded Solow’s model
show all

WWRR Vol.2.017

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?