WWRR Vol.2.017

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India Strategy Exhibit 3: The Indian market was among the best performing markets in 2018 Performance (not annualized) of emerging and developed markets over period of time (%) % change in local currency % change in USD 1-mo 3-mo 6-mo CYTD 1-yr 3-yr 5-yr 1-mo 3-mo 6-mo CYTD 1-yr 3-yr 5-yr Developed markets Australia (0) (9) (9) (7) (7) 7 5 (4) (11) (13) (16) (16) 3 (17) France (6) (14) (11) (11) (11) 2 10 (4) (15) (13) (15) (15) 7 (9) Germany (6) (14) (14) (18) (18) (2) 11 (5) (15) (16) (22) (22) 3 (8) Hong Kong (2) (7) (11) (14) (14) 18 11 (3) (7) (11) (14) (14) 17 10 Japan (10) (17) (10) (12) (12) 5 23 (8) (15) (10) (10) (10) 15 17 Singapore (2) (6) (6) (10) (10) 6 (3) (1) (5) (6) (12) (12) 11 (10) UK (3) (10) (12) (12) (12) 8 0 (3) (12) (15) (17) (17) (6) (23) US (Dow Jones) (10) (13) (5) (7) (7) 32 39 (10) (13) (5) (7) (7) 32 39 US (S&P500) (10) (15) (9) (7) (7) 22 34 (10) (15) (9) (7) (7) 22 34 MSCI World (8) (14) (10) (11) (11) 13 13 Emerging markets Brazil (2) 11 21 15 15 103 71 (2) 15 20 (2) (2) 107 4 MSCI China (7) (11) (19) (21) (21) 19 12 (7) (11) (19) (21) (21) 18 11 India (0) (1) 1 3 3 37 72 (0) 3 (1) (6) (6) 30 53 Indonesia 2 4 7 (3) (3) 35 45 1 6 5 (9) (9) 29 22 Korea (3) (13) (12) (17) (17) 4 1 (2) (13) (12) (21) (21) 10 (4) Malaysia 1 (6) (0) (6) (6) (0) (9) 2 (6) (3) (8) (8) 4 (28) Mexico (1) (16) (13) (16) (16) (4) (3) 3 (20) (13) (16) (16) (16) (35) Philippines 1 3 4 (13) (13) 7 27 1 5 5 (17) (17) (4) 7 Russia (5) (11) (8) (8) (8) 41 (26) (5) (11) (8) (8) (8) 41 (26) Taiw an (2) (12) (10) (9) (9) 17 13 (1) (12) (10) (11) (11) 26 10 Thailand (5) (11) (2) (11) (11) 21 20 (4) (12) (0) (11) (11) 35 22 MSCI EM (3) (8) (10) (17) (17) 21 (4) Source: Bloomberg, Kotak Institutional Equities Exhibit 4: IT and FMCG were the top performing sectors in 2018 Performance of sectoral indices (%) Healthcare IT % Change 1 month Sensex Auto Metal Realty Capital goods Banks FMCG BSE Smallcap BSE Midcap O&G (4) (3) (2) (1) 0 1 2 3 4 5 Metal IT O&G Healthcare % Change 3 months Auto Sensex BSE Smallcap FMCG BSE Midcap Realty Banks Capital goods (15) (10) (5) 0 5 10 15 Realty Auto Metal BSE Smallcap % Change 6 months Healthcare BSE Midcap O&G IT Sensex Banks FMCG Capital goods (15) (10) (5) 0 5 10 Realty BSE Smallcap Auto Metal O&G BSE Midcap Healthcare Capital goods Banks Sensex % Change CYTD FMCG IT (40) (30) (20) (10) 0 10 20 30 Source: Bloomberg, Kotak Institutional Equities 4 KOTAK INSTITUTIONAL EQUITIES RESEARCH
Strategy India Exhibit 5: Almost 40% of stocks of KIE coverage universe declined more than 20% in 2018 Number of stocks of KIE universe in various performance buckets (X) Below -20% Below -20% Betw een -20 and - 10% Betw een -20 and - 10% Betw een -10 and 0% Betw een -10 and 0% Betw een 0 and 10% Betw een 0 and 10% Above 20% Betw een 10 and 20% % Change 1 month Above 20% Betw een 10 and 20% % Change 3 months 0 20 40 60 80 100 120 0 10 20 30 40 50 60 70 Below -20% Below -20% Betw een -20 and - 10% Betw een -20 and -10% Betw een -10 and 0% Betw een -10 and 0% Betw een 0 and 10% Betw een 0 and 10% Betw een 10 and 20% % Change 6 months Betw een 10 and 20% % Change CYTD Above 20% Above 20% 0 10 20 30 40 50 60 0 10 20 30 40 50 60 70 80 Source: Bloomberg, Kotak Institutional Equities Exhibit 6: We expect earnings of the Nifty-50 Index to grow 14% in FY2019 and 27% in FY2020 Valuation summary of Nifty-50 sectors (full-float basis), March fiscal year-ends, 2019E-21E (based on current constituents) Mcap. Adj. mcap. Earnings growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Div. yield (%) (US$ bn) (US$ bn) 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E Automobiles & Components 84 46 (16) 46 17 24 16.7 14.3 9.0 7.0 6.0 2.7 2.4 2.1 1.1 1.3 1.4 11.0 14.4 14.9 Banks 230 169 64 107 24 31 14.8 11.9 — — — 2.4 2.1 1.8 0.5 0.8 0.9 7.8 14.2 15.2 Capital Goods 29 25 33 0.6 14 21 21 18.3 18 17 15 3.6 3.3 2.9 1.6 1.6 1.8 17.3 15.7 16.1 Commodity Chemicals 19 9 17 24 18 57 46 39 36 29 24 14 12 11 0.8 1.0 1.2 24 27 28 Construction Materials 23 9 43 22 19 21 17.0 14.3 9.9 8.8 7.7 1.9 1.7 1.5 0.4 0.4 0.4 9.0 9.9 10.6 Consumer Staples 106 53 13 14 13 40 35 31 27 24 21 12 11 10.0 1.6 1.8 2.1 29 31 32 Diversified Financials 90 71 (1.3) 22 22 30 25 20 — — — 4.6 4.1 3.6 1.0 1.1 1.4 15.5 16.6 17.7 Electric Utilities 32 13 17 14 14 10.4 9.1 8.0 8.2 7.3 6.5 1.3 1.2 1.1 3.0 3.5 3.9 12.9 13.4 13.9 Fertilizers & Agricultural Chemicals 6 4 9.5 15 11 16.1 14.0 12.6 10.6 9.0 7.8 3.5 3.0 2.5 1.2 1.4 1.6 22 21 19.8 Gas Utilities 12 4 55 3.5 8.0 11.4 11.0 10.2 7.2 6.9 6.3 1.8 1.7 1.5 3.1 3.2 3.5 16.0 15.2 15.0 IT Services 193 81 16 12 8.9 19.0 17.0 15.6 13 11.4 10.4 4.6 4.1 3.8 1.9 3.2 3.5 24 24 24 Media 7 4 11 17 13 28 24 22 17 15 13 5.4 4.7 4.2 0.9 1.2 1.5 18.8 19.4 19.3 Metals & Mining 37 23 21 5 10.0 7.8 7.5 6.8 5.6 5.4 5.0 1.1 1.0 0.9 2.0 2.3 2.3 14.6 13.9 13.7 Oil, Gas & Consumable Fuels 180 72 7.7 9.5 6.9 11.9 10.9 10.2 7.5 6.7 6.1 1.6 1.5 1.4 2.8 3.1 3.2 13.6 13.7 13.5 Pharmaceuticals 27 15 19 35 25 26 19.4 15.6 14 10.4 8.3 2.7 2.4 2.1 0.6 1.0 1.2 10.1 12.4 13.8 Retailing 12 6 28 25 20 57 46 38 38 30 24 14 11 9.5 0.5 0.6 0.8 24 25 25 Telecommunication Services 25 9 NM NM NM NM NM NM 9.1 8.4 7.1 2.3 2.5 2.7 2.5 2.5 2.6 NM NM 1.5 Transportation 11 4 9 11 28 19.2 17.2 13.5 14 11.8 10.5 3 3 2.4 0.3 0.5 0.4 17.5 16.7 18.0 Nifty-50 Index 1,122 545 14.2 27 14.8 20 15.9 13.8 9.9 8.8 7.9 2.7 2.4 2.2 1.5 1.9 2.1 13.2 15.2 15.6 Nifty-50 Index (ex-banks) 892 572 9.1 14.1 12.2 18.4 16.2 14.4 9.9 8.8 7.9 2.7 2.5 2.3 1.8 2.2 2.4 14.8 15.5 15.8 Nifty-50 Index (ex-energy) 942 545 16.8 33 17.2 23 17.4 14.8 11.1 9.8 8.7 3.0 2.7 2.4 1.3 1.7 1.9 13.1 15.7 16.4 RoE (%) Notes: (a) We use consensus numbers for Indiabulls Housing Finance and Kotak Mahindra Bank. Source: Kotak Institutional Equities estimates KOTAK INSTITUTIONAL EQUITIES RESEARCH 5
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Page 3: Dec-03 Dec-04 Dec-05 Dec-06 Dec-07
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 25 and 26: THE INVESTMENT OUTLOOK FOR 2019: LA
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
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Mar-15 Mar-16 Mar-17 Mar-18 Sep-18
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Asset Class Wise Growth and Outlook
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Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
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Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
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Asset Quality Trends
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Mar-15 Mar-16 Jun-16 Sep-16 Dec-16
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Asset Quality- Challenges set to re
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Jun-15 Sep-15 Dec-15 Mar-16 Jun-16
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Mar-15 Mar-16 Mar-17 Mar-18 Sep-18
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Christopher Wood christopher.wood@c
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1/4/2019 The struggle for India’s
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1/4/2019 The struggle for India’s
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Navigating 2019 Surprises for 2019?
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Navigating 2019 Svalbard, Norway. C
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Equities Oslo, Norway. Ole Jørgen
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Equities Emerging market equities C
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CY60 CY63 CY66 CY69 CY72 CY75 CY78
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% of Reserve % of Trade in USD 2004
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illion US$ US$ bn India Strategy No
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Metal index P/ B ratio Jan-12 May-1
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Jan-12 Apr-12 Jul-12 Oct-12 Jan-13
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economists expanded Solow’s model
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WWRR Vol.2.017

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