WWRR Vol.2.017

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