8/12/2019 ICICIdirect_EquityMarkets

1/1ICICI Securities Ltd.|Retail MF Research

Equity Markets

Update

After having delivered over 9% return in October, domestic equitybenchmarks were volatile during November, delivering negative return

of 1.8%. However, markets touched their all-time high levels on

euphoria after results for state elections were announced onexpectations that the BJP led NDA government will be able to garner a

decisive mandate in the general election in 2014

Midcap and small cap indices, however, continued their upward marchwith both indices ending the month with gains of 2% and 3.4%,

respectively. Capital goods and metals were the best performing

sectors during the month with gains of 7.3% and 2.6%, respectively.

Consumer durables, with a fall of 8.9%, was the worst performing

sector during November

India's September quarter GDP growth came in at 4.8%, a little betterthan market expectations. Strong agricultural growth of 4.6% YoY was

one of the key reasons for the positive surprise in this quarter. Theindustrial sector also recorded positive growth (1.6% YoY) after drifting

into the red last quarter. Services sector growth tapered down to 5.8%

YoY during the quarter, primarily due to a sharp fall in community,

social, and personal services

The overall Q2FY14 result season was marginally better than marketexpectations. Sensex companies recorded a good set of Q2FY14

numbers with topline and PAT growing ~14% and ~11% YoY,

respectively. Sales growth was largely driven by heavyweight sectors

like auto, IT and pharma largely on account of seasonality and a positive

currency impact. Currency depreciation was a big boon for all export

oriented players with almost all of them registering strong profit

growth. Domestic consumption, however, continued to remain weak

Inflation continued to remain a key challenge for policy makers withboth WPI and CPI inflation moving up in October. While WPI came in at

7%, CPI breached the 10% mark yet again, clearly indicating that

inflation pressures persist

Outlook

The improvement in current account deficit and stabilisation of currencyalong with some improvement in GDP growth has also improved

market sentiments, to a certain extent

However, other leading indicators like auto sales, cement dispatches, afurther rate hike by the RBI due to higher inflation, below average IIP

growth and signs of slowing domestic consumption continue to point

towards below average growth in the term

Significant foreign inflows are driving markets to all-time high levelsdiscounting the improvement in growth, going forward, on the back of

the BJP led NDA government. We think it is premature to extrapolate

the state election results to general election results

Those running systematic investment plans should continue to do so.With the BSE Sensex at an all-time high, the markets have entered

uncharted territory. However, given that the Indian economy is slowly

beginning to gain ground and foreign investors continue to favour India,

it is unlikely that markets could change course on the downside,

notwithstanding small corrections

NX Nifty : Volatile in current year

5200

5400

5600

5800

6000

6200

6400

6600

Jan-13

Feb-13

Mar-13

Apr-13

May-13

Jun-13

Jul-13

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Source: Bloomberg, ICICIdirect.com Research

harp pullback from recent low

6.6

3.4

0.5

-10.1

-15.8-20

-15

-10

-5

0

5

10

BSE

Sensex

BSE 100 BSE 500 BSE

Midcap

BSE

Small

Cap

R

eturn(%)

Source: Bloomberg, ICICIdirect.com Research

Returns : CY13 YTD

ally led by cyclicals

56.7

21.1

8

.8

6.6

6.0

-0.7

-8.1

-11.7

-12.1

-25.2

-35.2

-22.8-40

-20

020

40

60

80

IT

Healthcare

FMCG

Sensex

Auto

Oil&Gas

Cap.G

oods

Banking

Metal

PSU

Con.D

ura

Reality

Return

(%)

Source: Bloomberg, ICICIdirect.com Research

Returns : CY13 YTD

Analysts name

Sachin Jain

sachin.ja@icicisecurities.com

Sheetal Ashar

sheetal.ashar@icicisecurites.com