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INSTITUTIONAL EQUITY RESEARCH
Page | 1 | PHILLIPCAPITAL INDIA RESEARCH
Macro Outlook
FY19 – Possibly a year of sustainable gains, contingent on GST INDIA | INDONOMICS | Update
1 December 2017
Initial GST arrangement, demonetisation, tighter domestic banking liquidity, higher oil prices, and relatively tighter global monetary policy turned us cautious on any reasonable gush in India growth story for FY18 (retained our GDP estimate at 6.7%). After the recent slashing of GST rates, Moody’s rating upgrade (while other concerns persist), and other macro negatives discounted, we expect a relatively better ride in FY19.
Positives: Lower GST rates ‐ to boost consumption and faster shift from unorganised to organised to possibly result in higher tax collections in FY19 and higher government spending (positive for infra) – thus boosting C + G + I. External borrowing to turn cheaper (ET poll says 30‐50bps) and fewer uncertainties (like demonetisation/GST) in FY19. No incremental (anticipated) negative surprise on CAD, fiscal deficit, and bond yields. Path designed to resolve the banking NPA mess will lead to better credit growth. Stable to higher domestic liquidity. GST/demon/state elections behind, government to focus on other growth‐reviving micro and macro issues.
Negatives/uncertainties: Commodity prices, stable policy rates, tighter global monetary policy/liquidity, global currency, monsoon.
Equity – Positive; Bonds – Neutral; Currency – Neutral; Commodities (our assumption) – Neutral
FY19 growth – to get better; consumption strong, investment to improve: While FY19 growth is expected to be better, our FY19 GVA estimate is still in the muted range of 7.0‐7.5%. Consumption is expected to remain strong and investment activity should be better than last year. FY18 GVA is retained at 6.5%‐6.7%. 2HFY18 growth will statistically look impressive due to favourable base effect of demonetisation (Q4FY18 GVA estimate at 8%+). Sector‐wise expectation (FY19 vs. FY18) – agriculture (higher, while monsoon could be below normal), industry (better), and services (stable to better). We expect FMCG, consumer durables, infrastructure, banking, and real estate to do well. With slashed GST rates, a faster business shift from unorganised to organised is likely – positive for listed companies. BSE500 companies’ revenue/PAT growth for Q2FY18 was 20%/20% vs. 13%/‐3% a year ago and 8%/7% a quarter ago. Global economic growth is largely anticipated to hover around 2017 levels with gradual liquidity tightening and interest rates hikes by Fed and ECB.
RBI to stay focused on inflation targeting: While there are various moving factors (monsoon and oil prices), currently we see FY19 average CPI/WPI at 3.5‐4% vs. 3‐3.5% in FY18. Thus, we do not expect any further rate cuts until FY19. Bond yields have expectedly risen owing to inflation, fiscal slippage concerns, and banking liquidity absorption. Based on our inflation/fiscal/banking liquidity estimates, bond yields should hover around 7% +/‐25bps in the medium‐term. We maintain that banking liquidity (LAF) should turn neutral by FY18‐end. CIC expectedly saw a peak of Rs 16.5tn around festive season; it should stabilise at these levels. WPI‐CPI inflation gap has merged, which is a reflection of likely corporate margin stress ahead vs. benefits enjoyed for the last four years.
Fiscal deficit to stabilise well at 3.2% in FY19: Fiscal deficit in FY18 might slip to 3.4‐3.5% owing to GST reduction, lower RBI dividend, no telecom auctions, and petroleum excise duty reduction (assuming disinvestment target will be met). FY19 fiscal deficit should ideally be 3% (FRBM Act), but considering larger unknowns, we see it at 3.2%‐3.3%. The biggest unknown for FY19 is GST collections. FY19 Budget is likely to be populist, with continued focus on infra spending.
CAD to be stable; slight growth in exports and imports; stronger capital flows: We expect FY18 CAD growth at 1.5‐2.0% vs. 1.9‐2.4% in FY18. After having made a high base in FY18, CAD is expected to be stable in FY19 – positive for currency. We expect a 2‐3% rise in export/imports. Capital flows are expected to remain strong and rise to US$ 80bn+ in FY19 due to improving Indian economic fundamentals and the credit rating upgrade. We expect BoP surplus of US$ 30bn+ in FY19. Expected dollar‐rupee range at 63.50‐66.50 until FY19.
Anjali Verma (+ 9122 6246 4115) [email protected]
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INDONOMICS MACRO OUTLOOK
India GDP – Time for revival; hopefully no further delays We expect economic activity to see an up move in FY19, led by lower GST rates and macro factors (like oil prices, inflation, CAD, fiscal deficit etc.) at realistic levels. We were negative on the GST rates introduced in July 2017, as they were on the higher side, and would have adversely affected economic activity. Tax evasion would have become prevalent vs. its generally perceived benefit of greater compliance. Gradual GST changes and rate reduction is a reasonable long‐term positive and will have a positive GDP impact through Consumption (C), Investment (I), and Government spending (G) due to following: • More compliance as tax rates are lower than earlier – Positive for government
spending and investment (+ve: G,I) • Faster shift to the organised sector – Positive for government spending and
investment (+ve: G, I) • Higher tax collections will increase government spending and fiscal stability –
Positive for government spending and investment (+ve: G, I) • Lower tax rates will boost consumption – Positive for consumption (+ve: C) • Higher consumption demand to result in higher capacity utilisation and capacity
expansion in the next few years – Positive for investment (+ve: I) Another positive is in terms of India’s sovereign rating upgrade. Along with improving Indian economic fundamentals, capital flows towards India should rise in the near to long‐term – sustainably. Government has been putting in an effort to attract more FDI and the rating upgrade can give these an additional fillip. Higher FDI flows will also lead to more employment generation in the long run. Rural demand is seen reviving after two seasons of good monsoon along with the government’s investment in upgrading rural infrastructure. While some of these benefits are likely to flow in the rest of FY18, its sustainability needs to be watched –we have already had two consecutive years of good monsoon and continuation for the third year in the context of global warming is a big uncertainty. Another likely positive for FY19 is the government’s full attention and efforts towards reviving economic growth as demonetisation/GST/key state elections are over. FY18 was spent in formulating/introducing/implementing/resolving GST and elections in key states (as expected). Key states and union elections are due in FY19‐FY20; the central and state governments will try and bring Indian macros to a healthy level in order to come back to power, benefits of which should be visible in the coming quarters. We expect trend growth in agriculture (assuming normal monsoon), manufacturing to be higher, and stable to mildly higher growth for services. The expenditure side of the GDP should do well, led by uptick in C+I+G.
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GDP growth trends and estimates GDP Components FY13 FY14 FY15 FY16 FY17 FY18E FY19EAgriculture 1.2 4.3 ‐0.2 0.7 4.9 2.0 3.0Industry 4.9 4.4 6.5 10.2 7.0 4.9 5.8Mining and Quarrying ‐0.2 2.0 10.8 10.5 1.8 3.0 4.0Manufacturing 6.0 5.6 5.5 10.8 7.9 5.0 6.0Electricity, gas and water supply 4.0 ‐0.7 8.0 5.0 7.2 7.0 7.0Services 6.0 8.2 9.4 9.0 6.9 8.6 8.8Construction ‐4.3 10.5 4.4 5.0 1.7 5.0 6.5Trade, hotels, Transport & Communication 9.7 7.8 9.8 10.5 7.8 10.3 9.0Financing, Insurance, Real Estate & business services 9.5 10.1 10.6 10.8 5.7 9.1 9.0Community, social and personal services 4.1 4.5 10.7 6.9 11.3 8.0 10.0GVA at Basic Price 6.0 5.6 7.1 7.9 6.6 6.7 7.2PFCE (Constant price) 5.3 7.4 6.8 6.1 8.7 7.5 8.0GFCF (Constant price) 4.8 1.8 4.1 6.5 2.4 5.0 6.0GFCE (Constant price) 0.7 0.6 9.4 3.3 20.8 9.5 12.0
Source: RBI, CSO, PhillipCapital India Research Estimates List of states' government tenure and tentative date of elections in India State Tenure Date of Election Assembly Seats Lok Sabha Seats Rajya Sabha Seats
FY17
Tamil Nadu May 23, 2016 ‐ May 22, 2021 May‐16 234 39 18West Bengal May 27, 2016 ‐ May 26, 2021 May‐16 294 42 16Assam May 24, 2016 ‐ May 23, 2021 May‐16 126 14 7Puducherry Jun 3, 2016 ‐ Jun 4, 2020 May‐16 30 1 1Kerala May 25, 2016 ‐ May 24, 2021 May‐16 140 20 9Uttarakhand Mar 18, 2017 ‐ Mar 17, 2022 Feb‐17 70 5 3Punjab Mar 16, 2017 ‐ Mar 15, 2022 Feb‐17 117 13 7Goa Mar 15, 2017 ‐ Mar 14, 2022 Feb‐17 40 2 1UP May 19, 2017 ‐ Mar 18, 2022 Mar‐17 403 80 31Manipur Mar 15, 2017 ‐ Mar 14, 2022 Mar‐17 60 2 1
FY18
Himachal Jan 08, 2013 ‐ Jan 07, 2018 Nov‐17 68 4 3Gujarat Jan 23, 2013 ‐ Jan 22, 2018 Dec‐17 182 26 11Meghalaya Mar 7, 2013 ‐ Mar 6, 2018 Feb‐18 60 2 1Nagaland Mar 14, 2013 ‐ Mar 13, 2018 Feb‐18 60 1 1Tripura Mar 15, 2013 ‐ Mar 14, 2018 Feb‐18 60 2 1
FY19
Karnataka May 29, 2013 ‐ May 28, 2018 Apr‐18 224 28 12Mizoram Dec 16, 2013 ‐ Dec 15, 2018 Nov‐18 40 1 1Rajasthan Jan 21, 2014 ‐ Jan 20, 2019 Dec‐18 200 25 10Chhattisgarh Jun 06, 2014 ‐ Jan 05, 2019 Dec‐18 90 11 5MP Jan 08, 2014 ‐ Jan 07, 2019 Dec‐18 230 29 11
FY20
Sikkim May 28, 2014 ‐ May 27, 2019 Apr‐19 32 1 1AP Jun 15, 2014 ‐ Jun 14, 2019 May‐19 175 25 11Telangana June 09, 2014 ‐ June 08, 2019 May‐19 119 17 7Odisha June 12, 2014 ‐ June 11, 2019 May‐19 147 21 10Haryana Oct 26, 2014 ‐ Oct 25, 2019 Sep‐19 90 10 5Maharashtra Nov 10, 2014 ‐ Nov 9, 2019 Oct‐19 288 48 19
Source: Election Commission, PhillipCapital India Research
IIP growth inching higher, will likely sustain Electricity output decent; mining up; manufacturing sluggish
Source: PIB, CSO, PhillipCapital India Research
0.0
1.0
2.0
3.0
4.0
5.0
6.0
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8.0 IIP growth 3mma
‐10
‐5
0
5
10
15
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25 Mining Manufacturing Electricity
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GDP growth to pick‐up in coming quarters Revenue and Net profitability of BSE 500 companies
Source: RBI, CSO, PhillipCapital India Research Revenue growth of BSE 500 companies 2015 2015 2015 2015 2015 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017 2018 2018 2018E
Sector Q1 Q2 Q3 Q4 Y Q1 Q2 Q3 Q4 Y Q1 Q2 Q3 Q4 Y Q1 Q2 Rs mn
Industrials 33.4% 37.2% 47.8% 53.7% 8.8% ‐11.3% ‐12.1% ‐11.3% 10.2% ‐1.1% ‐5.1% ‐3.4% ‐11.6% ‐9.0% ‐0.8% 47.1% 18.2% 712449
Energy 562.6% 587.3% 463.9% 326.8% ‐2.9% ‐12.4% ‐30.3% ‐17.8% ‐17.5% ‐20.5% ‐22.7% 4.6% 28.7% 33.2% 5.7% 22.6% 95.6% 939164
Cons Disc 36.7% 18.0% 18.2% 11.1% 14.2% 0.0% 22.6% 24.4% 36.0% 17.3% 40.0% 19.1% 8.5% 1.5% 11.4% ‐2.2% 4.6% 2534827
Materials 38.3% 7.8% 6.4% ‐1.4% 6.7% ‐7.8% ‐8.7% ‐10.6% ‐4.3% ‐7.9% 3.4% 16.9% 8.9% 12.9% 4.0% 17.0% 11.6% 1438349
Utilities 10.1% 5.2% 18.0% ‐6.9% 4.1% 7.8% 20.2% 9.2% 23.6% 6.2% ‐0.9% ‐7.3% ‐10.8% ‐10.6% 2.0% 30.9% 72.9% 286562
Health Care 24.4% 21.9% 16.8% 19.1% 20.1% 15.6% 14.8% 21.1% 19.6% 12.4% 19.0% 16.8% 10.3% 0.1% 6.7% 2.7% 5.5% 444875
Financials 12.7% 11.0% 8.6% 16.2% 16.4% 2.8% 3.1% 16.4% 9.6% 7.8% 39.1% 22.3% ‐3.8% 16.0% 8.5% 3.5% 28.1% 1632764
IT 20.8% 17.5% 18.7% 0.7% 0.8% 13.3% 12.2% 9.4% 30.3% 28.5% 16.0% 11.4% 11.7% 8.5% 8.5% 2.1% 3.3% 1066797
Cons Staple 31.6% 28.4% 37.9% 30.0% 19.3% 15.1% 16.5% 7.8% 12.8% 4.0% 13.4% 7.5% ‐2.4% ‐12.4% ‐1.2% ‐14.7% ‐6.6% 219548
Telecom 11.7% 7.3% 7.7% 5.4% 9.3% 1.6% 0.4% ‐0.2% 2.9% 0.7% 5.1% 5.8% ‐2.8% ‐11.1% ‐2.5% ‐12.3% ‐17.1% 462043
Real Estate 25.8% 12.4% 28.4% ‐1.9% 10.0% 12.7% 45.2% 30.7% 36.0% 14.2% ‐1.9% ‐17.9% ‐17.9% ‐17.3% ‐13.3% 3.8% ‐8.3% 66805
BSE500 43.7% 32.1% 30.3% 22.0% 7.3% ‐1.0% 1.0% 5.2% 12.8% 0.1% 14.9% 12.7% 5.5% 6.4% 6.1% 7.8% 19.8% 9804183
Source: Bloomberg, PhillipCapital India Research Estimates PAT growth of BSE 500 companies 2015 2015 2015 2015 2015 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017 2018 2018 2018E
Sector Q1 Q2 Q3 Q4 Y Q1 Q2 Q3 Q4 Y Q1 Q2 Q3 Q4 Y Q1 Q2 Rs mn
Industrials ‐2068% ‐16569% ‐1317% ‐34% ‐31% 100% 65% ‐184% 48% 178% ‐2% 40% 54% 39% ‐13% 23% 10% 43612
Energy 155% 158% 117% 136% ‐14% 6% 46% 26% 0% 25% ‐7% ‐37% 1% ‐9% 20% 11% 95% 79003
Cons Disc 129% 6% ‐20% ‐41% ‐3% 7% ‐107% 1% 123% 10% ‐39% ‐953% ‐44% 12% 1% 37% 83% 57478
Materials 71% 69% 3% ‐401% ‐65% ‐47% 19% ‐76% ‐35% ‐62% ‐7% ‐37% 521% ‐167% 563% 195% 55% 73516
Utilities ‐302% ‐935% 239% ‐46% ‐3% 69% 427% 95% ‐25% 5% 7% 43% ‐26% ‐397% ‐3% 38% 200% 14966
Health Care 839% 9% ‐30% ‐1% 33% ‐26% 29% 62% 12% 8% 22% 21% 13% ‐12% 7% ‐59% ‐12% 68340
Financials 6% 2% 2% 8% 10% ‐1% ‐1% ‐45% ‐54% ‐42% ‐29% ‐18% 64% ‐28% 18% 10% ‐4% 114378
IT 22% 17% 7% ‐22% ‐5% 6% 10% 8% 47% 29% 12% 7% 9% 5% 5% 0% 1% 170266
Cons Staple 32% 21% 33% 37% 7% 14% 19% 21% ‐19% 9% 4% 19% ‐3% 39% 13% ‐1% 8% 23089
Telecom 41% 43% 85% 36% ‐46% 45% 12% ‐11% ‐17% 15% ‐26% ‐48% ‐39% ‐124% ‐68% ‐164% ‐284% 16617
Real Estate 8% 0% 44% ‐46% ‐8% ‐43% 61% 64% ‐54% ‐24% 125% 10% ‐45% 123% 38% ‐22% ‐54% 7859
BSE500 69% 30% 1% ‐42% ‐9% 1% 2% 6% 28% ‐1% ‐11% ‐3% 16% 28% 16% 7% 20% 669125
Source: Bloomberg, PhillipCapital India Research Estimates
0
2
4
6
8
10GDP growth rate (%, yoy)
‐60%
‐40%
‐20%
0%
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40%
60%
80%
1Q2014
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3Q2014
4Q2014
1Q2015
2Q2015
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4Q2015
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3Q2016
4Q2016
1Q2017
2Q2017
3Q2017
4Q2017
1Q2018
2Q2018
Revenue growth Net profit growth
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Sector‐wise outlook and trend (Our Analyst Expectations) FMCG – Positive: FMCG volume growth was impacted post demonetisation (fell to ‐2% average growth in Q3FY17‐Q1FY18), its seen picking up well (growth at +6% in Q2FY18; Q3/Q4 growth estimate at 9%/7%). Volume growth estimates for FY18/FY19 at 7.5%/8.7% vs. 4.7% in FY17. Post lowering of GST rates, consumption should shift to the listed/organised players further raising their volume growth in the coming years. Automobiles – Positive: Auto volumes are rising for last three quarters, Q2FY18 at 11%, largely being led by CVs and two‐wheelers; passenger vehicles growth was muted due to GST rates. Going ahead, we expect auto production growth to rise to 12% vs. 10% in FY18 and 5.5% in FY17, all the categories are expected to do well. Consumer durables – Positive: Growth will likely be stable at 12‐13% for the next few years. GST rates are similar to pre‐GST tax slabs for consumer durables. Growth rate for cables/tiles/plywood is marginally higher at 9%/10%/9% for FY19‐20. GST rates are approximately 8% lower vs. pre‐GST regime for tiles and plywood, thus a shift to organised is likely as current unorganised share is 30‐40%. Consumer durables sector outlook Sector Volume
Growth Estimated
Volume Growth (FY17 to FY20)
TAX pre GST GST rate Price Hike Organised:Unorganised
Rural: Urban
Consumer Durables 12% 13% 26% 28% ~4% 80:20 33:67Cables & Wires 8% 9% ‐10% 18% 18% *15% 40:60 40:60Tiles 10% 9% to12% 26% 18% ‐ 40:60 40:60Plywood 7% 8% to10% 26% 18% ‐ 30:70 40:60
Source: PhillipCapital India Research Advertising – Positive: Growth rate had dropped to 11% in FY16, its expected to rise to 15‐16% annual growth in FY18‐FY20. Higher advertising growth is a key indicator of improving economic activity. Toll collections – Stable/Positive: It rose sharply in Q2FY18, growth rate at 8% vs. an average rate of 0% in the previous three quarters. Real trend is expected to remain stable, going ahead. Ports – Stable/Positive: Volume growth in Q2FY18 was adversely impacted by GST, it fell to 3.6% yoy vs. last 4‐quarter average at 6%. Recently government has announced sops for the textiles industry which is expected to boost trade volumes and likely positive impact on ports activity. FY17 volume growth was 7.7%, it expected to remain in the same range in FY18‐FY19. This is in line with our expectation of muted trade activity in FY19.
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INDONOMICS MACRO OUTLOOK
FMCG and automobile volume growth – picking up Rural volumes of PVs and 2‐wheelrs – Trending upward
Source: SIAM, Companies, PhillipCapital India Research Sector‐wise growth indicators (% yoy, Volume growth) Annual Growth rates FY13 FY14 FY15 FY16 FY17 FY18E FY19EFMCG Volume (ex ITC) 8.4 8.3 6.0 6.3 4.7 7.5 8.7Ports volume 2.2 4.2 8.2 1.9 7.7 7.8 7.8Fuel Consumption 6.0 1.0 4.0 12.0 5.0 2.0 5.0Advertisement 10.9 14.2 14.7 11.2 13.1 15.1 16.3 Passenger Vehicles Sales 2.7 ‐4.4 4.3 7.6 9.4 11.0 13.0Commercial Vehicles Sales ‐10.4 ‐16.0 ‐0.1 12.7 3.0 7.0 11.0Three Wheelers sales ‐4.5 ‐1.1 14.3 ‐1.6 ‐16.2 6.0 8.0Two Wheelers Sales 2.1 7.2 9.5 1.8 5.8 10.0 12.0Tractors Sales ‐1.7 20.2 ‐13.0 ‐10.5 18.0 15.0 ‐2.6Total Automobiles Sales 1.3 4.1 8.6 2.8 5.4 9.9 12.0
Source: Companies, PhillipCapital India Research Estimates Volume growth rates of FMCG, autos, advertising, ports, and fuel
Source: Companies, PhillipCapital India Research Estimates
‐10%
‐5%
0%
5%
10%
15%
20%
‐10%
0%
10%
20%
30%
40%
50%
60%
Q1FY11
Q3FY11
Q1FY12
Q3FY12
Q1FY13
Q3FY13
Q1FY14
Q3FY14
Q1FY15
Q3FY15
Q1FY16
Q3FY16
Q1FY17
Q3FY17
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Automobiles (Total)FMCG (Ex ITC) volume (rhs)
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100000
150000
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250000
300000
350000
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500000
1000000
1500000
2000000
2500000
3000000
3500000
Q1FY11
Q3FY11
Q1FY12
Q3FY12
Q1FY13
Q3FY13
Q1FY14
Q3FY14
Q1FY15
Q3FY15
Q1FY16
Q3FY16
Q1FY17
Q3FY17
Q1FY18
2‐wheelers (rhs)Passenger VehiclesLinear (2‐wheelers (rhs))Linear (Passenger Vehicles)
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FY13 FY14 FY15 FY16 FY17 FY18E FY19E
FMCG Volume (ex ITC)% Ports volumeFuel Consumption AdvertisementTotal Automobiles
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Investment – CAPEX seems to be gradually improving While CMIE capex was not quite positive for Q2FY18, in general, the trend seems upwards. Projects under implementation improved; but fell for outstanding, new, and completed projects. Based on order inflows of infra and capital goods companies, sharp surge is estimated for FY18/FY19, growth at 7.6%/14% vs. 2% in FY17. For infra companies, sharp rise in seen in the order inflows from roads, irrigation, power (sharp surge), and metros. For capital goods, defence and power orders are expected to contribute more in FY19. Order Inflows of Infra and Capital good companies (Quarterly and Annual) (Rs bn) Quarterly 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18Total (Infra) 683 835 836 833 862 841Total (Capital goods) 484 502 539 948 457 461Total 1166 1336 1374 1781 1319 1302Annual FY15 FY16 FY17 FY18E FY19EInfra 658 749 824 975 1116Capital goods 2397 2446 2437 2533 2883Total 3056 3196 3261 3508 3999yoy growth rate 4.6 2.0 7.6 14.0
Source: Companies, PhillipCapital India Research Estimates Sector‐wise order inflows of infra companies (Rs bn) 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18Total 682.7 834.7 835.8 833.5 862.2 841.3Roads 253.1 296.0 307.4 402.5 385.5 383.7Irrigation 34.6 41.2 39.6 51.2 49.4 63.3Buildings 122.0 134.5 125.9 119.8 136.4 132.3Power 8.8 8.4 17.4 85.5 83.1 80.5Others 101.3 153.2 146.3 147.3 159.8 132.9Metros 0.0 20.1 24.5 27.2 48.1 48.6
Source: Companies, PhillipCapital India Research Sectors where order book is inching up (CMIE data): Chemicals, consumer goods, transport services, irrigation. Sectors where order book is stable (CMIE data): Textiles, construction materials, metals, machinery, transport equipment, mining, wholesale/retail trading, communication services. Sectors where order book is declining (CMIE data): Food & agro based products, electricity, hotels & tourism, information technology. Government: private sector (CMIE data): • Outstanding projects – Government share rising. Now at 55% (highest in four
quarters). Central government’s share is hovering around 62%. • Projects announced – Government share is higher at 59%. Private sector
declining. Central government is doing a better job here; 70.5% share. • Projects completed – No clear trend. Trend is mixed and volatile between private
sector and government. • New projects – In general, private sector’s share is higher than the government
(except for Q2) at 59%. Based on number of projects, share is equally divided currently.
FY19 GFCF growth is estimated at 6% vs. 5% in FY18. Progress will largely be led by the public sector; Sectors where improvement is expected remain the same – roads, metros, and irrigation. So far, public capex spend has been progressing well, with focus on metros, roads, housing, defence, and rural development. It is quite weak in railways and power.
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GFCF growth rate (%) CMIE project’s status
Source: RBI, CMIE, PhillipCapital India Research Estimates
CMIE data reflects government capex is revving while private sector capex stagnates Projects outstanding by value (Rs bn)
Projects outstanding by number
Source: CMIE, PhillipCapital India Research
‐10%
‐5%
0%
5%
10%
15%
20%
(1,000,000)
‐
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000 Outstanding QoQUnder Implementation QoQCompletedNew
0
20,000
40,000
60,000
80,000
100,000
120,000
Jun‐95
Jan‐97
Aug‐98
Mar‐00
Oct‐01
May‐03
Jan‐05
Aug‐06
Mar‐08
Oct‐09
May‐11
Jan‐13
Aug‐14
Mar‐16
Government Private Sector
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70,000
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Jan‐06
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Sep‐07
Jul‐0
8
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Jan‐11
Nov
‐…
Sep‐12
Jul‐1
3
May‐…
Mar‐…
Jan‐16
Nov
‐…
Sep‐17
Central GovernmentGovernment State
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Jun‐95
Oct‐96
Feb‐98
Jun‐99
Oct‐00
Feb‐02
Jun‐03
Oct‐04
Feb‐06
Jun‐07
Oct‐08
Feb‐10
Jun‐11
Oct‐12
Feb‐14
Jun‐15
Oct‐16
Government Private Sector
0
1000
2000
3000
4000
5000
6000
Jun‐95
Sep‐96
Jan‐98
Apr‐99
Jul‐0
0Oct‐01
Jan‐03
Apr‐04
Jul‐0
5Oct‐06
Jan‐08
Apr‐09
Jul‐1
0Oct‐11
Jan‐13
Apr‐14
Jul‐1
5Oct‐16
Central GovernmentGovernment State
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Projects announced by value (Rs bn) Projects under implementation by value (Rs bn)
Projects shelved by value (Rs bn) Projects completed by value (Rs bn)
New projects by value (Rs bn) New projects by value (Rs bn)
Source: CMIE, PhillipCapital India Research
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Jun‐95
Jan‐97
Aug‐98
Mar‐00
Oct‐01
May‐03
Jan‐05
Aug‐06
Mar‐08
Oct‐09
May‐11
Jan‐13
Aug‐14
Mar‐16
GovernmentCentral GovernmentGovernment State
Private Sector
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Jun‐…
Jan‐…
Aug‐…
Mar…
Oct‐…
May…
Jan‐…
Aug‐…
Mar…
Oct‐…
May…
Jan‐…
Aug‐…
Mar…
GovernmentCentral GovernmentGovernment State
Private Sector
0
500
1,000
1,500
2,000
2,500
Jun‐95
Jan‐97
Aug‐98
Mar‐00
Oct‐01
May‐03
Jan‐05
Aug‐06
Mar‐08
Oct‐09
May‐11
Jan‐13
Aug‐14
Mar‐16
Government Private Sector
0
200
400
600
800
1,000
1,200
1,400
1,600Jun‐95
Jan‐97
Aug‐98
Mar‐00
Oct‐01
May‐03
Jan‐05
Aug‐06
Mar‐08
Oct‐09
May‐11
Jan‐13
Aug‐14
Mar‐16
Government Private Sector
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Jun‐95
Jan‐97
Aug‐98
Mar‐00
Oct‐01
May‐03
Jan‐05
Aug‐06
Mar‐08
Oct‐09
May‐11
Jan‐13
Aug‐14
Mar‐16
Government Private Sector
0
500
1,000
1,500
2,000
2,500
3,000
Jun‐95
Jan‐97
Aug‐98
Mar‐00
Oct‐01
May‐03
Jan‐05
Aug‐06
Mar‐08
Oct‐09
May‐11
Jan‐13
Aug‐14
Mar‐16
Government State Central Government
Page | 10 | PHILLIPCAPITAL INDIA RESEARCH
INDONOMICS MACRO OUTLOOK
Global growth: While one supposes its rising, data/estimates don’t show this Based on IMF estimates, global GDP growth pick up was faster in 2017 and is expected to hover around the same levels until 2020. Similarly, global trade volume growth in 2018‐2019 will be lower than in 2017. Thus, we do not expect a significant run‐up in India’s exports. Commodity prices are estimated to be stable. The growth pace of advanced countries is likely to be similar to 2017, implying aggressive monetary/liquidity tightening is unlikely. In the medium‐term, liquidity tightness can have an adverse impact on India’s asset class (equity, debt, and currency; ample domestic liquidity (financial savings) will be supportive in general. Globally, inflation will be subdued, employment near full employment, and growth will be led by a mix of consumption and investment. Global macro indicators and estimates (IMF) Subject Descriptor Units 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020EGDP, constant prices % change 5.4 4.3 3.5 3.5 3.6 3.4 3.2 3.6 3.7 3.7 3.7GDP, current prices USD bn 65906 73119 74489 76551 78594 74312 75368 79281 84375 88849 93496Investment % of GDP 24.3 25.1 25.3 25.3 25.6 25.8 25.3 25.4 25.5 25.7 25.8Gross national savings % of GDP 24.7 25.6 26.0 26.0 26.4 26.5 25.8 25.8 25.8 25.9 26.0Inflation, average consumer prices % change 3.7 5.0 4.1 3.7 3.2 2.8 2.8 3.1 3.3 3.3 3.3Trade volume of goods and services % change 12.5 7.1 2.7 3.6 3.8 2.8 2.4 4.2 4.0 3.9 3.8Vol of imports of goods and services % change 12.4 7.3 2.6 3.5 4.0 2.6 2.5 4.2 4.2 4.1 4.0Vol of exports of goods and services % change 12.6 6.9 2.8 3.8 3.7 3.1 2.3 4.1 3.9 3.7 3.7Commodity Price Index includes Fuel and Non‐Fuel
Index, 2005=100 152.1 192.1 185.7 182.8 171.5 111.1 100.0 112.3 112.2 111.9 111.4
Crude Oil (petroleum) USD per barrel 79.0 104.0 105.0 104.1 96.2 50.8 42.8 50.3 50.2 50.5 51.1Food and Beverage Price Index Index, 2005=100 152.9 183.3 175.3 174.5 170.9 143.9 145.8 149.1 150.6 150.1 146.4Commodity Metals Price Index Index, 2005=100 202.3 229.7 191.0 182.9 164.4 126.6 119.7 144.5 146.5 145.0 144.4
Source: IMF, PhillipCapital India Research Estimates Country‐wise macro indicators and estimates (IMF) Country Subject Descriptor Units 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020EAustralia GDP, constant prices % change 2.3 2.7 3.6 2.1 2.8 2.4 2.5 2.2 2.9 3 2.8Australia GDP, current prices USD bn 1250 1504 1561 1510 1450 1230 1262 1390 1482 1564 1631Australia Inflation, average consumer prices % change 2.9 3.3 1.7 2.5 2.5 1.5 1.3 2 2.2 2.4 2.5Australia Unemployment rate % of labor force 5.2 5.1 5.2 5.7 6.1 6.1 5.7 5.6 5.4 5.2 5France GDP, constant prices % change 2 2.1 0.2 0.6 0.9 1.1 1.2 1.6 1.8 1.9 1.9France GDP, current prices USD bn 2652 2865 2683 2809 2854 2435 2467 2575 2766 2871 2975France Inflation, average consumer prices % change 1.7 2.3 2.2 1 0.6 0.1 0.3 1.2 1.3 1.6 1.7France Unemployment rate % of labor force 9.3 9.2 9.8 10.3 10.3 10.4 10 9.5 9 8.7 8.3Germany GDP, constant prices % change 3.9 3.7 0.7 0.6 1.9 1.5 1.9 2.1 1.8 1.5 1.4Germany GDP, current prices USD bn 3424 3761 3546 3754 3897 3377 3479 3652 3935 4074 4212Germany Inflation, average consumer prices % change 1.1 2.5 2.1 1.6 0.8 0.1 0.4 1.6 1.5 2 2.1Germany Unemployment rate % of labor force 6.9 59 5.4 5.2 5 4.6 4.2 3.8 3.7 3.7 3.6Japan GDP, constant prices % change 4.2 ‐0.1 1.5 2 0.3 1.1 1 1.5 0.7 0.8 0.2Japan GDP, current prices USD bn 5700 6158 6203 5156 4849 4380 4937 4885 5063 5205 5280Japan Inflation, average consumer prices % change ‐0.7 ‐0.3 ‐0.1 0.3 2.8 0.8 ‐0.1 0.4 0.5 1.1 1.6Japan Unemployment rate % of labor force 5.1 4.6 4.3 4 3.6 3.4 3.1 2.9 2.9 2.9 2.9UK GDP, constant prices % change 1.9 1.5 1.3 1.9 3.1 2.2 1.8 1.7 1.5 1.6 1.7UK GDP, current prices USD bn 2431 2611 2656 2722 3002 2863 2629 2565 2661 2731 2804UK Inflation, average consumer prices % change 3.3 4.5 2.8 2.6 1.5 0 0.7 2.6 2.6 2.2 2.1UK Unemployment rate % of labor force 7.9 8.1 8 7.6 6.2 5.4 4.9 4.4 4.4 4.6 4.5United States GDP, constant prices % change 2.5 1.6 2.2 1.7 2.6 2.9 1.5 2.2 2.3 1.9 1.8United States GDP, current prices USD bn 14964 15518 16155 16692 17428 18121 18625 19362 20200 21024 21846United States Inflation, average consumer prices % change 1.6 3.1 2.1 1.5 1.6 0.1 1.3 2.1 2.1 2.6 2.4United States Unemployment rate % of labor force 9.6 8.9 8.1 7.4 6.2 5.3 4.9 4.4 4.1 4.2 4.4
Source: IMF, PhillipCapital India Research Estimates
Page | 11 | PHILLIPCAPITAL INDIA RESEARCH
INDONOMICS MACRO OUTLOOK
Country‐wise GDP on PPP basis (USD Bn); India ranks third
Source: IMF, PhillipCapital India Research
Credit growth: Faring well, services doing better FYTD addition to banking credit is better at Rs 3,290bn vs. Rs 927bn last year; yoy growth at 8% vs. 7% last year. Due to muted base last year post demonetisation, credit growth in the coming months will likely be in the 8%+ range. CP issuances have also picked up since September 2017 and gathered pace in November 2017. • Agri credit: Rose marginally due to slowing monsoon (+6% yoy). • Industry credit: Largely unchanged, growth at ‐0.4% yoy
o Though, its share in non‐food credit has shrunk marginally to 37% from 39% a year ago (yearly average 39%), industrial credit grew for micro and small industries (1.7%) while it fell for medium industries (‐8%) and large industries (‐0.4%).
o Industry‐wise, higher credit growth can be seen in gems & jewellery. o Stable‐higher credit growth: Textiles, leather & leather products, wood &
wood products, chemicals, rubber and plastic products, cement, engineering, automobiles, construction, and infrastructure.
o Stable to lower credit growth: Mining, food processing, beverages, paper & paper products, and metals.
o Lower credit growth: Petroleum, coal products and nuclear fumes. • Services credit: Fared well in September
o Growth is at 7%. Rising for almost all segments, majorly in trade (wholesale and retail), NBFCs, real estate, and other services
• Personal loans: Reasonable improvement – 17% growth o Sharp rise in priority sector housing (for few months) o Other segments that recorded an increase are – personal loans, vehicle
loans, and credit card outstanding. • Priority‐sector credit has seen a reasonable increase in September
o Sharp rise in MSME credit (manufacturing and services) and agriculture o Gradual progress also seen in housing, and export credit.
0
5000
10000
15000
20000
25000
China
India
Germany
Indo
nesia
United Kingdo
mMexico
Turkey
Saud
i Arabia
Canada
Australia
Egypt
Nigeria
Pakistan
Nethe
rland
sPh
ilipp
ines
Colombia
Banglade
shVietnam
Belgium
Switzerland
Kazakhstan
Hong
Kon
g SA
RAu
stria
Vene
zuela
Czech Re
public
Page | 12 | PHILLIPCAPITAL INDIA RESEARCH
INDONOMICS MACRO OUTLOOK
Credit and deposit growth rates (FYTD, %) Credit and deposit growth (yoy, %)
Source: RBI, Bloomberg, PhillipCapital India Research Outstanding CP issuance (Rs bn) – Uptick in Sep‐Nov
Source: RBI, Bloomberg, PhillipCapital India Research
Money supply (FYTD and yoy) Currency with public (FYTD and yoy)
Source: RBI, Bloomberg, PhillipCapital India Research
‐4
‐2
0
2
4
6
8
Apr‐Nov 11
Apr‐Nov 12
Apr‐Nov 13
Apr‐Nov 14
Apr‐Nov 15
Apr‐Nov 16
Apr‐Nov 17
Credit Deposits
0
2
4
6
8
10
12
14
0
24
6
8
10
12
1416
18Deposits Credit (RHS)
0
1,000
2,000
3,000
4,000
5,000
6,000
Jun 15, 2011
Oct 15, 2011
Feb 15, 2012
Jun 15, 2012
Oct 15, 2012
Feb 15, 2013
Jun 15, 2013
Oct 15, 2013
Feb 15, 2014
Jun 15, 2014
Oct 15, 2014
Feb 15, 2015
Jun 15, 2015
Oct 15, 2015
Feb 15, 2016
Jun 15, 2016
Oct 15, 2016
Feb 15, 2017
Jun 15, 2017
Oct 15, 2017
0
5
10
15
20
25
0
2
4
6
8
10
12 YTD YoY (RHS)
0
5
10
15
20
25
‐10
‐5
0
5
10
15
20YTD Yoy (RHS)
Page | 13 | PHILLIPCAPITAL INDIA RESEARCH
INDONOMICS MACRO OUTLOOK
Inflation – to inch up Policy rates – stable Bond yields – to remain elevated Liquidity – to turn neutral in FY18 CPI is likely to inch up from current levels – to 4.0‐4.5% by March 2018 – led by unfavourable base and stable price rise. Vegetable inflation should contract in coming months due to seasonality. GST rate cuts will have a positive impact (but the impact will be more on WPI vs. CPI). Domestic fuel prices have been kept stable amidst state elections (we were expecting these to rise in line with market price formulae now in place. Both these factors should have a relative positive impact on the November CPI reading. However, we expect the CPI rate to rise. We are seeing the WPI‐CPI inflation gap narrowing significantly, which is a reflection of likely corporate margin stress ahead (companies enjoyed benefits for the last four years). Our estimates are based on stable commodity prices. Commodity prices have risen meaningfully in 2017, discounting for higher economic growth, further sharp rise from current levels seems unlikely assuming not‐so‐week Dollar. PC average CPI estimate – FY18: 3.0%, FY19: 3.5‐4.0%. WPI estimate – FY18: 3.0%, FY19: 3.5‐4.0%. Based on our estimates (which are near 4% –, also the RBI’s inflation target), we expect RBI to stay on hold until FY19. We believe bond yields are likely to remain around current levels (anticipated range of 7% +/‐ 25bps) assuming neutral domestic banking liquidity, fiscal deficit at 3.2%, and global liquidity tightness. Our view of neutral banking liquidity in FY18 has almost played out. Current LAF surplus is at Rs 200bn (it was around Rs 3tn in January‐September 2017). There are various factors that are unknown and therefore the risk factors to our CPI/interest rate estimates – oil prices, monsoon, impact of state’s HRA, and other commodity prices. WPI, CPI inflation merging – implying lower corporate margins
Source: CSO, EAI, PhillipCapital India Research Estimates
‐8‐6‐4‐202468101214
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
Sep‐17
Jan‐18
May‐18
Sep‐18
Jan‐19
CPI, YoY WPI, YoY
Page | 14 | PHILLIPCAPITAL INDIA RESEARCH
INDONOMICS MACRO OUTLOOK
CPI inflation rate (Food components) CPI inflation rate (main components)
Source: PIB, CSO, PhillipCapital India Research Tighter banking liquidity and rising bond yields
Source: Bloomberg, RBI, PhillipCapital India Research
‐30
‐20
‐10
0
10
20
30
40
50
Apr‐14
Jul‐1
4
Oct‐14
Jan‐15
Apr‐15
Jul‐1
5
Oct‐15
Jan‐16
Apr‐16
Jul‐1
6
Oct‐16
Jan‐17
Apr‐17
Jul‐1
7
Oct‐17
Cereals PulsesMilk Vegetables
‐2
0
2
4
6
8
10
12
Apr‐14
Jul‐1
4
Oct‐14
Jan‐15
Apr‐15
Jul‐1
5
Oct‐15
Jan‐16
Apr‐16
Jul‐1
6
Oct‐16
Jan‐17
Apr‐17
Jul‐1
7
Oct‐17
Clothing Food HousingServices Fuel
6.0
6.3
6.5
6.8
7.0
7.3
7.5
7.8
‐20
‐10
0
10
20
30
40
50
60
70
4‐Ap
r‐16
4‐May‐16
4‐Jun‐16
4‐Jul‐1
6
4‐Au
g‐16
4‐Sep‐16
4‐Oct‐16
4‐Nov
‐16
4‐De
c‐16
4‐Jan‐17
4‐Feb‐17
4‐Mar‐17
4‐Ap
r‐17
4‐May‐17
4‐Jun‐17
4‐Jul‐1
7
4‐Au
g‐17
4‐Sep‐17
4‐Oct‐17
4‐Nov
‐17
Total Liquidity Position 10‐ year bond yield
Page | 15 | PHILLIPCAPITAL INDIA RESEARCH
INDONOMICS MACRO OUTLOOK
Fiscal account likely to be stressed in FY18 as well as FY19 Fiscal deficit for FY18 is likely to slip to 3.4‐3.5% vs. 3.2% BE due to lower GST rates, lower RBI dividend, drop in collections from telecom auction, and lesser petroleum excise duty. April‐September fiscal deficit is at 91% of BE vs. 84% last year (five‐year average of 75%). Tax revenue collection is faring well, but it is the non‐tax revenue that will lead to higher deficit (as expenditure is steady) – non‐tax revenue collection is at 28% of BE vs. the last five‐year average of 46%. Disinvestment target of Rs 725bn is likely to be achieved (Rs 480bn so far). Within direct taxes, income tax collections are anticipated to be reasonably below target for FY18. We are assuming that banking recapitalisation liability will be treated off‐balance sheet. FYTD ministry‐wise expenditure trends: • Sectors where spending is higher than 50% of BE ‐ agriculture, atomic energy,
chemicals, commerce, posts (120%), consumer affairs & PDS (86%), defense, defense capital exp (59% of BE), housing (72% of BE), health, police, HRD, MSME, petroleum & natural gas, rural development (62%), urban development (61%), Road transport (at 63%), education (51%).
• Sharply low spending in railways (31%), power, renewable energy and skill development amongst the key sectors.
FY19 fiscal deficit FRBM target is at 3%, this is only possible in case of a sharp rise in GST collections in FY19 (which are muted FYTD18) and higher disinvestment. To highlight, there is still not much clarity/stability in GST collections, therefore FY19 fiscal estimates are at risk. There is also no clarity about transfers of GST revenue to states and its impact on gross/net tax revenue. Assuming a slight improvement in GST compliance, muted rise in expenditure, stable disinvestment and oil prices – we arrive at a fiscal deficit of 3.2%‐3.3% for FY19. Gross borrowings are expected to remain elevated/higher at Rs 6tn+. Thus, bond yields will likely remain elevated in FY19, implying limited possibility of further banking transmission. Bond yields scenarios (sequence based on its likelihood): 1) Fiscal deficit: 3.2‐3.3%, CPI: 3.5‐4.0%: 10‐year bond yield range should be
6.75%‐7.15% 2) Fiscal deficit: 3.3‐3.4%, CPI: 4%+: 10‐year bond yield range should be 6.90%‐
7.25% 3) Fiscal deficit: 3%, CPI: 3.5‐4.0%: 10‐year bond yield range should be 6.50%‐
6.80%
Page | 16 | PHILLIPCAPITAL INDIA RESEARCH
INDONOMICS MACRO OUTLOOK
FYTD Key Ministry‐wise central government expenditure (April‐October)
MINISTRY/DEPARTMENT Rs Bn % of BEMinistry of Agriculture 328.3 64%Dept of Agriculture Cooperation & Farmers Welfare 264.3 63% Revenue 264.3 63% Capital 0.1 7%Department of Fertilizers 434.4 62% Revenue 434.4 62% Capital 0.0 0%Department of Posts 133.3 140% Revenue 130.4 144% Capital 2.9 58%Ministry of Consumer Affairs, Food and PDS 1332.3 86%Department of Consumer Affairs 36.0 97% Revenue 35.9 97% Capital 0.1 42%Department of Food & Public Distribution 1296.3 86% Revenue 1296.2 86% Capital 0.1 25% Ministry of Defence (MISC) 2429.7 68%Ministry of Defence(Misc) 78.6 53% Revenue 52.1 53% Capital 26.5 52% Defence Services (Revenue) 1145.0 66% Revenue 1145.0 66%Capital Outlay on Defence Services 576.1 67% Capital 576.1 67%Defence Pensions 630.0 73% Revenue 630.0 73%Ministry of Drinking Water and Sanitation 108.0 54%Ministry of Drinking Water and Sanitation 108.0 54%Revenue 108.0 54%Ministry of Finance 3723.1 50%Interest Payments 2579.1 49% Revenue 2579.1 49%Pensions 272.8 80% Revenue 272.8 80%Transfers to States 655.1 48% Revenue 540.1 46% Capital 115.0 62%Ministry of Health and Family Welfare 288.4 59%Department of Health and Family Welfare 280.3 59% Revenue 268.9 61% Capital 11.3 32%Police 499.3 64% Revenue 443.1 66% Capital 56.2 50%Ministry of Human Resource Development 465.0 58%Department of School Education and Literacy 288.3 62% Revenue 288.3 62%
MINISTRY/DEPARTMENT YTD Oct2017
% of BE
Department of Higher Education 176.7 53% Revenue 174.2 53% Capital 2.5 100%Ministry of Micro, Small and Medium Enterprises 46.9 72%Ministry of Micro, Small and Medium Enterprises 46.9 72% Revenue 46.9 72% Capital 0.0 13%Ministry of Petroleum and Natural Gas 284.5 98%Ministry of Petroleum and Natural Gas 284.5 98% Revenue 284.5 112% Capital 0.0 0%Ministry of Power 69.2 50%Ministry of Power 69.2 50% Revenue 62.9 61% Capital 6.2 17%Ministry of Railways 229.0 42%Ministry of Railways 229.0 42% Revenue 0.0 Capital 229.0 42%Ministry of Road Transport and Highways 414.1 64%Ministry of Road Transport and Highways 414.1 64% Revenue 22.5 21% Capital 391.5 72%Ministry of Rural Development 686.0 64%Department of Rural Development 679.0 64% Revenue 679.0 64% Capital 0.0 0%Ministry of Skill Development and Entrepreneurship 11.9 40%Ministry of Skill Development and Entrepreneurship 11.9 40% Revenue 11.9 43% Capital 0.0 1%Department of Space 49.6 55%Department of Space 49.6 55% Revenue 30.3 61% Capital 19.3 46%Ministry of Tourism 10.6 57%Ministry of Tourism 10.6 57% Revenue 10.6 58% Capital 0.0 0%Ministry of Urban Development 217.2 63%Department of Urban Development 217.2 63% Revenue 110.2 74% Capital 106.9 55% Total Expenditure 12926.5 60% REVENUE 11298.5 61% CAPITAL 1627.9 53%
Source: CGA, PhillipCapital India Research
Page | 17 | PHILLIPCAPITAL INDIA RESEARCH
INDONOMICS MACRO OUTLOOK
FYTD Central government tax revenue Oct‐17 YoY Oct‐16 YoY Apr‐Oct 17 YoY Apr‐Oct 16 YoY FY18BE YoY
Gross Tax Revenue 1395.7 13.3 1231.9 27.1 9734.1 19% 8188.8 18% 19116.0 12%Corporation Tax 239.5 16.6 205.5 30.8 2318.6 12% 2073.3 5% 5387.0 9%Income Tax 295.0 15.0 256.6 28.3 1973.5 16% 1698.9 19% 4413.0 25%Direct Tax 534.5 15.7 462.0 29.4 4292.1 14% 3772.3 ‐64% 9800.0 GST 576.1 2051.3 Customs 73.7 ‐61.0 188.8 3.1 944.3 ‐26% 1279.7 5% 2450.0 13%Excise 177.3 ‐37.4 283.2 39.1 1477.0 ‐18% 1806.6 46% 4069.0 5%Service Tax 20.6 ‐92.7 282.4 30.7 779.8 ‐38% 1249.1 25% 2750.0 11%Indirect Tax 847.6 12.4 754.4 25.2 5252.4 21% 4335.5 25% 9269.0
Source: CGA, PhillipCapital India Research Gross tax revenue and its components
____________Rs Bn____________ ______________YoY______________ ______________% of GDP______________FY16 FY17 FY18BE FY18RE FY19PC FY16 FY17 FY18BE FY18RE FY19PC FY16 FY17 FY18BE FY18RE FY19PC
Gross Tax Revenue 14556 17032 19116 18267 20832 16.9% 17.0% 12.2% 7.2% 14.0% 10.6% 11.2% 11.3% 10.8% 12.3%Direct Tax 7419 8471 9800 9343 10329 6.7% 14.2% 15.7% 10.3% 10.6% 5.4% 5.6% 5.8% 5.6% 5.5%Personal Income Tax 2876 3532 4413 3956 4430 8.2% 22.8% 24.9% 12.0% 12.0% 2.1% 2.3% 2.6% 2.4% 2.4%Corporation Tax 4532 4939 5387 5387 5899 5.7% 9.0% 9.1% 9.1% 9.5% 3.3% 3.3% 3.2% 3.2% 3.2%Indirect tax 7098 8519 9269 8924 10503 30.0% 20.0% 8.8% ‐3.7% 17.7% 5.2% 5.6% 5.5% 5.3% 5.6%GST 4125 7200 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.5% 3.9%Excise Duty 2881 3874 4069 2543 2053 51.7% 34.5% 5.0% ‐37.5% ‐19.3% 2.1% 2.6% 2.4% 1.5% 1.1%Customs Duty 2103 2170 2450 1261 800 11.9% 3.2% 12.9% ‐48.5% ‐36.6% 1.5% 1.4% 1.5% 0.8% 0.4%Service Tax 2114 2475 2750 995 450 25.9% 17.1% 11.1% ‐63.8% ‐54.8% 1.5% 1.6% 1.6% 0.6% 0.2%
Source: CGA, Budget docs, PhillipCapital India Research Estimates Central Fiscal Account
____________Rs Bn____________ _____________% of GDP___________ ____yoy growth rate (%)____FY16 FY17 FY18BE FY18PC FY19PC FY16 FY17 FY18BE FY18PC FY19PC FY17 FY18BE FY18PC FY19PC
Nominal GDP 136820 151837 168475 167173 186230 11.0 11.0 10.1 11.4Revenue receipts 11950 14236 15158 14859 15970 8.7 9.4 9.0 8.9 8.6 19.1 6.5 4.4 7.5Tax (net) 9438 10888 12270 12765 13270 6.9 7.2 7.3 7.6 7.1 15.4 12.7 17.2 4.0Non ‐ tax 2513 3348 2888 2095 2700 1.8 2.2 1.7 1.3 1.4 33.2 ‐13.7 ‐37.4 28.9Capital receipts 5958 5908 6310 6598 6774 4.4 3.9 3.7 3.9 3.6 ‐0.8 6.8 11.7 2.7Recovery of loans 208 111 119 119 119 0.2 0.1 0.1 0.1 0.1 ‐46.9 7.8 7.8 0.0Other receipts 421 455 725 725 725 0.3 0.3 0.4 0.4 0.4 8.0 59.3 59.3 0.0Borrowings and other liabilities 5328 5343 5465 5753 5929 3.9 3.5 3.2 3.4 3.2 0.3 2.3 7.7 3.1Total receipts 17908 20144 21467 21457 22744 13.1 13.3 12.7 12.8 12.2 12.5 6.6 6.5 6.0Scheme Expenditure 7251 8698 9451 9441 10126 5.3 5.7 5.6 5.6 5.4 20.0 8.6 8.5 7.3Revenue A/c 5456 6315 6741 6941 7280 4.0 4.2 4.0 4.2 3.9 15.7 6.7 9.9 4.9Capital A/c 1795 2383 2710 2500 2846 1.3 1.6 1.6 1.5 1.5 32.8 13.7 4.9 13.8Non‐Scheme Expenditure 10657 11446 12017 12017 12618 7.8 7.5 7.1 7.2 6.8 7.4 5.0 5.0 5.0Revenue A/c 9921 11030 11629 11629 12268 7.3 7.3 6.9 7.0 6.6 11.2 5.4 5.4 5.5Interest payments 4417 4831 5231 5231 4950 3.2 3.2 3.1 3.1 2.7 9.4 8.3 8.3 ‐5.4Capital A/c 735 415 388 388 350 0.5 0.3 0.2 0.2 0.2 ‐43.5 ‐6.6 ‐6.6 ‐9.7Total revenue expenditure 15378 17346 18369 18369 19548 11.2 11.4 10.9 11.0 10.5 12.8 5.9 5.9 6.4Total capital expenditure 2530 2798 3098 3098 3196 1.85 1.84 1.84 1.9 1.7 10.6 10.7 10.7 3.2Total expenditure 17908 20144 21467 21457 22744 13.1 13.3 12.7 12.8 12.2 12.5 6.6 6.5 6.0Fiscal deficit 5328 5343 5465 5753 5929 3.9 3.5 3.2 3.4 3.2 0.3 2.3 7.7 3.1Revenue deficit 3427 3110 3212 3510 3578 2.5 2.0 1.9 2.1 1.9 ‐9.3 3.3 12.9 1.9Effective Revenue deficit 2110 1395 1258 1259 1260 1.5 0.9 0.7 0.8 0.7 ‐33.9 ‐9.8 ‐9.8 0.1Primary deficit 911 512 235 522 979 0.7 0.3 0.1 0.3 0.5 ‐43.8 ‐54.2 2.0 87.5Gross Market Borrowing 5850 5820 5800 6056 6260 4.3 3.8 3.4 3.6 3.4 ‐0.5 ‐0.3 4.0 3.4Net Market Borrowing 4406 4067 4232 4488 4625 3.2 2.7 2.5 2.7 2.5 ‐7.7 4.1 10.3 3.1
Source: CGA, Budget docs, PhillipCapital India Research Estimates
Page | 18 | PHILLIPCAPITAL INDIA RESEARCH
INDONOMICS MACRO OUTLOOK
FY19 CAD expected at 1.5‐2.0%; elevated but similar to FY18 Imports have expectedly outpaced exports growth in FYTD owing to higher oil and non‐oil imports. • We retain higher‐than‐consensus estimates on CAD for FY18 at 1.9‐2.4% of GDP • FY18 exports growth: 7% vs. 5.2% in FY17; FY18 imports growth: 17% vs. ‐1% in
FY17. • Capital flows are likely to be stable in FY18 however lower than Q1 addition. • FY19 CAD estimate is at 1.5‐2% of GDP assuming similar and muted growth in
exports and imports at 2%/2.5%. We do not anticipate any meaningful uptick in Indian exports as global growth trend is largely unchanged. Assuming stable oil prices, we also expect imports growth to be muted at 2.5% due to the high base of FY18. Invisibles growth should persist in FY19 (growth at 7% vs. 11.5% in FY18) due to software services and remittances. Capital flows are expected to be stronger than FY18, at US$ 80bn+, resulting in a forex accretion of US$ 34bn. We expect dollar‐rupee range at 63.50‐66.50 until FY19. Appreciation will be led by higher capital flows due to attractive/improving Indian economic fundamentals as well as India’s sovereign rating upgrade. FDI and FII flows should be strong in FY19 while ECB flows should see a pick‐up owing to cheaper external borrowing cost because of the rating upgrade. Pressure on the rupee may come from dollar strength in case of stronger‐than‐expected improvement in its growth prospects (led by fiscal measures). Overall, we expect fed rate hike and US balance‐sheet tightening to stay gradual. ECB tightening is likely in 2018, also gradual. Oil prices will be one of the crucial factors to influence rupee movement, along with flows and global currencies. Trade trends and its components ___________USD Bn___________ _______YoY growth_______ ___________% of GDP___________ FY16 FY17 FY18E FY19E FY17 FY18E FY19E FY16 FY17 FY18E FY19EExports 266.4 280.1 299.7 305.7 5.2 7.0 2.0 12.7 12.4 11.6 10.6Imports 396.4 392.6 459.3 470.8 ‐1.0 17.0 2.5 19.0 17.3 17.8 16.3 Oil Imports 82.8 84.3 99.5 110.0 1.8 18.0 10.6 4.0 3.7 3.9 3.8 Non‐oil imports 313.6 308.3 359.8 360.8 ‐1.7 16.7 0.3 15.0 13.6 13.9 12.5Trade deficit ‐130.1 ‐112.4 ‐159.6 ‐165.1 ‐13.6 41.9 3.4 ‐6.2 ‐5.0 ‐6.2 ‐5.7Net Invisibles 107.9 97.1 108.3 116.2 ‐10.0 11.5 7.3 5.2 4.3 4.2 4.0 Software services 71.5 70.1 73.6 76.5 ‐1.9 5.0 4.0 3.4 3.1 2.8 2.6 Remittances 62.6 56.0 58.8 61.7 ‐10.6 5.0 5.0 3.0 2.5 2.3 2.1 Investment income ‐24.4 ‐26.3 ‐23.0 ‐21.0 7.9 ‐12.5 ‐8.7 ‐1.2 ‐1.2 ‐0.9 ‐0.7Current Account Deficit ‐22.2 ‐15.3 ‐51.2 ‐48.8 ‐31.0 234.9 ‐4.7 ‐1.1 ‐0.7 ‐2.0 ‐1.7Foreign investment 31.9 43.2 48.0 57.0 35.5 11.0 18.8 1.5 1.9 1.9 2.0 FDI 36.0 35.6 28.0 32.0 ‐1.1 ‐21.4 14.3 1.7 1.6 1.1 1.1 FII ‐4.1 7.6 20.0 25.0 ‐284.3 162.7 25.0 ‐0.2 0.3 0.8 0.9External borrowing ‐4.6 2.4 4.0 6.5 ‐151.3 68.1 62.5 ‐0.2 0.1 0.2 0.2 ECB ‐4.5 ‐6.1 1.0 2.0 34.7 ‐116.4 100.0 ‐0.2 ‐0.3 0.0 0.1 Short‐term trade credit ‐1.6 6.5 1.5 2.5 ‐501.7 ‐76.8 66.7 ‐0.1 0.3 0.1 0.1Banking Capital 10.6 ‐16.6 10.0 15.0 ‐256.3 ‐160.2 50.0 0.5 ‐0.7 0.4 0.5 NRI deposits 16.1 ‐12.4 5.0 8.0 ‐177.0 ‐140.4 60.0 0.8 ‐0.5 0.2 0.3Capital Account 41.1 36.5 64.9 82.0 ‐11.3 78.0 26.3 2.0 1.6 2.5 2.8
Source: RBI, Ministry of Commerce, PhillipCapital India Research Estimates
Page | 19 | PHILLIPCAPITAL INDIA RESEARCH
INDONOMICS MACRO OUTLOOK
Imports growth outpace exports lately Net invisibles improve gradually – led by software and remittances
Source: RBI, Ministry of Commerce, PhillipCapital India Research CAD increased in Q1FY18 led by higher imports Forex Reserves and Dollar‐Rupee
Source: RBI, Ministry of Commerce, Bloomberg, PhillipCapital India Research Exports, imports, trade (% of GDP) CAD and BoP (% of GDP)
Source: RBI, Ministry of Commerce, CSO, PhillipCapital India Research
‐30
‐20
‐10
0
10
20
30
40
50
60 Exports growth Imports growth
‐30
‐20
‐10
0
10
20
30
40
50
‐10
‐5
0
5
10
15
20Software servicesNet Invisibles (rhs)
‐40000
‐30000
‐20000
‐10000
0
10000
20000
30000
40000
Q1FY13
Q2FY13
Q3FY13
Q4FY13
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
Q2FY15
Q3FY15
Q4FY15
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
CAD Capital account BoP
60
62
64
66
68
70
310320330340350360370380390400410
1‐Ap
r‐15
1‐Jun‐15
1‐Au
g‐15
1‐Oct‐15
1‐De
c‐15
1‐Feb‐16
1‐Ap
r‐16
1‐Jun‐16
1‐Au
g‐16
1‐Oct‐16
1‐De
c‐16
1‐Feb‐17
1‐Ap
r‐17
1‐Jun‐17
1‐Au
g‐17
1‐Oct‐17
Forex reserve (Rs Bn) Exchange Rate (RHS)
‐12
‐10
‐8
‐6
‐4
‐2
0
0
5
10
15
20
25
30
2000
‐01
2001
‐02
2002
‐03
2003
‐04
2004
‐05
2005
‐06
2006
‐07
2007
‐08
2008
‐09
2009
‐10
2010
‐11
2011
‐12
2012
‐13
2013
‐14
2014
‐15
2015
‐16
2016
‐17
2017
‐18E
2018
‐19E
ExportsImportsTrade Balance (rhs)
‐6
‐4
‐2
0
2
4
6
8
10
2000
‐01
2001
‐02
2002
‐03
2003
‐04
2004
‐05
2005
‐06
2006
‐07
2007
‐08
2008
‐09
2009
‐10
2010
‐11
2011
‐12
2012
‐13
2013
‐14
2014
‐15
2015
‐16
2016
‐17
2017
‐18E
2018
‐19E
Invisibles Current AccountCapital Account BOP
Page | 20 | PHILLIPCAPITAL INDIA RESEARCH
INDONOMICS MACRO OUTLOOK
Commodity‐wise exports Higher: Engineering goods, Petroleum products, organic and inorganic chemicals, Rice, Spices, Marine Products, Plastic and Linoleum Stable: Leather and leather products, Electronic goods, Cotton yarn, Mica, Coal and other ores, RMG of Textiles Lower: Drugs and Pharmaceuticals, Gems and jewellery, tobacco, Oilseeds, Fruits and Vegetables Commodity‐wise imports Higher: Petroleum and crude, electronic goods, pearls and precious stones, Machinery Electrical and Non‐electrical, Iron and steel, Artificial Resins and plastic materials. Stable: Chemical and Material Products, Medicinal and Pharma products, Leather and Leather products, Machine tools, Newsprint Lower: Fertilisers, Sulphur & Unroasted Iron Pyrts, Transport Equipment Country‐wise exports Higher: USA, China, Singapore, Germany, Italy, Japan, Korea RP, Australia, South Africa Stable: UK, Hong Kong, Indonesia, Israel Lower: UAE, Vietnam, Bangladesh, Nepal, Belgium, Turkey, Netherland Country‐wise imports Higher: China, Switzerland, USA, UAE, Saudi Arab, Indonesia, Korea, Hong Kong, Australia, Germany, Japan Stable: Vietnam, Egypt, Malaysia Lower: Turkey, Argentina, Netherlands, France, Netherland Country‐wise exports (USD mn) Country‐wise imports (USD mn)
Source: RBI, Ministry of Commerce, PhillipCapital India Research
0
2000
4000
6000
8000
10000
12000
14000
16000
Apr‐15
Jun‐15
Aug‐…
Oct‐15
Dec‐15
Feb‐16
Apr‐16
Jun‐16
Aug‐…
Oct‐16
Dec‐16
Feb‐17
Apr‐17
Jun‐17
Europe Africa America Asia
0
5000
10000
15000
20000
25000
30000
Apr‐15
Jun‐15
Aug‐15
Oct‐15
Dec‐15
Feb‐16
Apr‐16
Jun‐16
Aug‐16
Oct‐16
Dec‐16
Feb‐17
Apr‐17
Jun‐17
Europe Africa America Asia
Page | 21 | PHILLIPCAPITAL INDIA RESEARCH
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Annual Economic Indicators and Forecast Indicators Units FY7 FY8 FY9 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19EReal GDP/GVA growth % 9.6 9.3 6.7 8.6 8.9 6.7 6.0 5.6 7.1 7.9 6.6 6.5‐6.7 7‐7.5 Agriculture % 4.2 5.8 0.1 0.8 8.6 5.0 1.5 4.2 ‐0.2 0.7 4.9 2.0 3.0 Industry % 12.9 9.2 4.1 10.2 8.3 6.7 5.0 4.5 6.5 10.2 7.0 4.9 5.8 Services % 10.1 10.3 9.4 10.0 9.2 7.1 6.1 8.2 9.4 9.1 6.9 8.6 8.8Real GDP Rs Bn 35644 38966 41587 45161 49185 52475 85992 90844 97190 104905 111854 119349 127942Real GDP US$ Bn 787 967 908 953 1079 1096 1694 1581 1589 1603 1667 1843 1984Nominal GDP Rs Bn 42937 49864 56301 64778 77841 87360 99466 112366 124451 136820 151837 167173 186230Nominal GDP US$ Bn 948 1237 1229 1367 1707 1824 1828 1859 2035 2090 2264 2582 2887WPI (Average) % 6.6 4.7 8.1 3.8 9.6 8.7 7.4 6.0 2.0 ‐2.5 3.7 3.0 3.5‐4CPI (Average) 6.8 6.4 9.0 12.4 10.4 8.3 10.2 9.5 6.4 4.9 4.5 3.4 3.7‐4.2Money Supply % 20.0 22.1 20.5 19.2 16.2 15.8 13.6 13.5 12.0 10.3 7.3 9.5 10.0CRR % 6.00 7.50 5.00 5.75 6.00 4.75 4.00 4.00 4.0 4.0 4.0 4.0 4.0Repo rate % 7.50 7.75 5.00 5.00 6.75 8.50 7.50 8.00 7.50 6.75 6.25 6.00 6.00Reverse repo rate % 6.00 6.00 3.50 3.50 5.75 7.50 6.50 7.00 6.50 5.75 5.75 5.75 5.75Bank Deposit growth % 23.8 22.4 19.9 17.2 15.9 13.5 14.2 14.6 12.1 9.7 11.2 8.0 11.0Bank Credit growth % 28.1 22.3 17.5 16.9 21.5 17.0 14.1 13.5 12.5 10.7 4.7 9.0 10.0Centre Fiscal Deficit Rs Bn 1426 1437 3370 4140 3736 5160 5209 5245 5107 5328 5343 5684 5959Centre Fiscal Deficit % of GDP 3.3 2.9 6.0 6.4 4.8 5.7 5.2 4.6 4.1 3.9 3.5 3.4 3.2State Fiscal Deficit % of GDP 1.8 1.5 2.4 2.9 2.1 1.9 2.0 2.2 2.6 3.6 3.0 3.5 3.2Consolidated Fiscal Deficit % of GDP 5.1 4.4 8.4 9.3 6.9 7.6 6.9 7.1 6.6 7.5 6.5 6.9 6.4Exports US$ Bn 128.9 166.2 189.0 182.4 251.1 309.8 306.6 318.6 316.7 266.4 280.1 299.7 305.7YoY Growth % 22.6 28.9 13.7 ‐3.5 37.6 23.4 ‐1.0 3.9 ‐0.6 ‐15.9 5.2 7.0 2.0Imports US$ Bn 190.7 257.6 308.5 300.6 381.1 499.5 502.2 466.2 460.9 396.4 392.6 459.3 470.8YoY Growth % 21.4 35.1 19.7 ‐2.5 26.7 31.1 0.5 ‐7.2 ‐1.1 ‐14.0 ‐1.0 17.0 2.5Trade Balance US$ Bn ‐61.8 ‐91.5 ‐119.5 ‐118.2 ‐129.9 ‐189.8 ‐195.6 ‐147.6 ‐144.2 ‐130.1 ‐112.4 ‐159.6 ‐165.1Net Invisibles US$ Bn 52.2 75.7 91.6 80.0 84.6 111.6 107.5 115.2 116.2 107.9 97.1 108.3 116.2Current Account Deficit US$ Bn ‐9.6 ‐15.7 ‐27.9 ‐38.2 ‐45.3 ‐78.2 ‐88.2 ‐32.4 ‐27.9 ‐22.2 ‐15.3 ‐51.2 ‐48.8CAD (% of GDP) % ‐1.0 ‐1.3 ‐2.3 ‐2.8 ‐2.6 ‐4.2 ‐4.7 ‐1.7 ‐1.4 ‐1.1 ‐0.7 ‐2.0 1.5‐2Capital Account Balance US$ Bn 45.2 106.6 7.8 51.6 62.0 67.8 89.3 48.8 90.0 41.1 36.5 64.9 82.0Dollar‐Rupee (Average) 45.3 40.3 45.8 47.4 45.6 47.9 54.4 60.5 61.2 65.5 67.0 64.8 64.5
Source: RBI, CSO, CGA, Ministry of Agriculture, Ministry of commerce, Bloomberg, PhillipCapital India Research Estimates
Page | 22 | PHILLIPCAPITAL INDIA RESEARCH
INDONOMICS MACRO OUTLOOK
Management Vineet Bhatnagar (Managing Director) (91 22) 2483 1919 Kinshuk Bharti Tiwari (Head – Institutional Equity) (91 22) 6246 4101 Jignesh Shah (Head – Equity Derivatives) (91 22) 6667 9735 Research Automobiles Engineering, Capital Goods Pharma & Specialty Chem Dhawal Doshi (9122) 6246 4128 Jonas Bhutta (9122) 6246 4119 Surya Patra (9122) 6246 4121 Nitesh Sharma, CFA (9122) 6246 4126 Vikram Rawat (9122) 6246 4120 Mehul Sheth (9122) 6246 4123 Banking, NBFCs IT Services & Infrastructure Strategy Manish Agarwalla (9122) 6246 4125 Vibhor Singhal (9122) 6246 4109 Naveen Kulkarni, CFA, FRM (9122) 6246 4122 Pradeep Agrawal (9122) 6246 4113 Shyamal Dhruve (9122) 6246 4110 Neeraj Chadawar (9122) 6246 4116 Paresh Jain (9122) 6246 4114 Logistics, Transportation & Midcap Telecom Consumer & Retail Vikram Suryavanshi (9122) 6246 4111 Naveen Kulkarni, CFA, FRM (9122) 6246 4122 Naveen Kulkarni, CFA, FRM (9122) 6246 4122 Media Preeyam Tolia (9122) 6246 4129 Naveen Kulkarni, CFA, FRM (9122) 6246 4122 Technicals Metals Subodh Gupta, CMT (9122) 6246 4136 Cement Dhawal Doshi (9122) 6246 4128 Production Manager Vaibhav Agarwal (9122) 6246 4124 Ganesh Deorukhkar (9122) 6667 9966 Economics Mid-Caps Editor Anjali Verma (9122) 6246 4115 Deepak Agarwal (9122) 6246 4112 Roshan Sony 98199 72726 Shruti Bajpai (9122) 6246 4135 Oil & Gas Sr. Manager – Equities Support
Sabri Hazarika (9122) 6246 4130 Rosie Ferns (9122) 6667 9971
Sales & Distribution Corporate Communications Ashvin Patil (9122) 6246 4105 Asia Sales Zarine Damania (9122) 6667 9976 Kishor Binwal (9122) 6246 4106 Dhawal Shah 8522 277 6747 Bhavin Shah (9122) 6246 4102 Sales Trader Ashka Mehta Gulati (9122) 6246 4108 Dilesh Doshi (9122) 6667 9747 Execution Archan Vyas (9122) 6246 4107 Suniil Pandit (9122) 6667 9745 Mayur Shah (9122) 6667 9945
Contact Information (Regional Member Companies)
SINGAPORE: Phillip Securities Pte Ltd 250 North Bridge Road, #06‐00 RafflesCityTower,
Singapore 179101 Tel : (65) 6533 6001 Fax: (65) 6535 3834
www.phillip.com.sg
MALAYSIA: Phillip Capital Management Sdn Bhd B‐3‐6 Block B Level 3, Megan Avenue II,
No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur Tel (60) 3 2162 8841 Fax (60) 3 2166 5099
www.poems.com.my
HONG KONG: Phillip Securities (HK) Ltd 11/F United Centre 95 Queensway Hong Kong Tel (852) 2277 6600 Fax: (852) 2868 5307
www.phillip.com.hk
JAPAN: Phillip Securities Japan, Ltd 4‐2 Nihonbashi Kabutocho, Chuo‐ku
Tokyo 103‐0026 Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141
www.phillip.co.jp
INDONESIA: PT Phillip Securities Indonesia ANZTower Level 23B, Jl Jend Sudirman Kav 33A,
Jakarta 10220, Indonesia Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809
www.phillip.co.id
CHINA: Phillip Financial Advisory (Shanghai) Co. Ltd. No 550 Yan An East Road, OceanTower Unit 2318
Shanghai 200 001 Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940
www.phillip.com.cn THAILAND: Phillip Securities (Thailand) Public Co. Ltd.
15th Floor, VorawatBuilding, 849 Silom Road, Silom, Bangrak, Bangkok 10500 Thailand
Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921 www.phillip.co.th
FRANCE: King & Shaxson Capital Ltd. 3rd Floor, 35 Rue de la Bienfaisance
75008 Paris France Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017
www.kingandshaxson.com
UNITED KINGDOM: King & Shaxson Ltd. 6th Floor, Candlewick House, 120 Cannon Street
London, EC4N 6AS Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835
www.kingandshaxson.com UNITED STATES: Phillip Futures Inc.
141 W Jackson Blvd Ste 3050 The Chicago Board of TradeBuilding
Chicago, IL 60604 USA Tel (1) 312 356 9000 Fax: (1) 312 356 9005
AUSTRALIA: PhillipCapital Australia Level 10, 330 Collins Street
Melbourne, VIC 3000, Australia Tel: (61) 3 8633 9800 Fax: (61) 3 8633 9899
www.phillipcapital.com.au
SRI LANKA: Asha Phillip Securities Limited Level 4, Millennium House, 46/58 Navam Mawatha,
Colombo 2, Sri Lanka Tel: (94) 11 2429 100 Fax: (94) 11 2429 199
www.ashaphillip.net/home.htm INDIA
PhillipCapital (India) Private Limited No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013 Tel: (9122) 2483 1919 Fax: (9122) 6667 9955 www.phillipcapital.in
Page | 23 | PHILLIPCAPITAL INDIA RESEARCH
INDONOMICS MACRO OUTLOOK
Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd.
This report is issued by PhillipCapital (India) Pvt. Ltd., which is regulated by the SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only, and neither the information contained herein, nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment, or derivatives. The information and opinions contained in the report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication of future performance.
This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice.
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any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co‐managed in the previous twelve months, a private or public offering of securities for
the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in
connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report: Sr. no. Particulars Yes/No
1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL
No
2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the company(ies) covered in the Research report
No
3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No4 PCIL or its affiliates have managed or co‐managed in the previous twelve months a private or public offering of securities for the
company(ies) covered in the Research report No
5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months
No
Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report.
Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results.
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INDONOMICS MACRO OUTLOOK
Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document.
Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorised use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety.
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Kindly note that past performance is not necessarily a guide to future performance.
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For U.S. persons only: This research report is a product of PhillipCapital (India) Pvt Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S.‐regulated broker‐dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker‐dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances, and trading securities held by a research analyst account.
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