Mirae India Outlook 2012
-
Upload
nivas-lakshminarasimhan -
Category
Documents
-
view
225 -
download
0
Transcript of Mirae India Outlook 2012
-
8/13/2019 Mirae India Outlook 2012
1/18
0
For Professional Investors Only
India Market Outlook - 2012
EmergingMarketExperts
Sailing Through Global Headwinds
-
8/13/2019 Mirae India Outlook 2012
2/18
1
For Professional Investors Only
In 2011 most of the global indices headed southwards, the Indian bourses were among the worst performing
indices in Asia and among major indices globally, with negative performance of -24.6%. BSE Sensex hit a 28
month low in December (15,175). On a dollar indexed basis, performance was even worse as Rupee
depreciated (by 18% YTD).
In 2011 the BRIC countries were down 18-25%, but there 3 year returns are quite good (except China) in the
late teens (15-23%)
The US Markets (Dow Jones) was the best performing market and the one of the only developed market which
has delivered positive returns of 5.5% in 2011.
Global Equity Market UpdateCY 2011
Country Equity Markets 3 Month 6 Month 1 year 3 year
IndiaSENSEX -6.07% -17.99% -24.64% 17.01%
NIFTY -6.45% -18.12% -24.62% 16.04%
Hong Kong Hang Seng 4.79% -17.70% -19.97% 8.61%
Korea KOSPI 3.17% -13.09% -10.98% 17.53%
Brazil BOVESPA 8.47% -9.05% -18.11% 14.76%
Japan NIKKEI -2.82% -13.86% -17.34% -1.54%
Russia MSCI Russia 6.08% -26.84% -20.95% 22.89%
USDow Jones 11.95% -1.59% 5.53% 11.66%
NASDAQ 7.86% -6.07% -1.80% 18.21%
ChinaShanghai Composite Index -6.77% -20.37% -21.68% 6.50%
MSCI China 7.79% -19.84% -20.41% 9.06%
Germany DAX 7.20% -20.04% -14.69% 7.03%
France CAC 5.96% -20.65% -16.95% -0.61%
UK FTSE 8.65% -6.28% -5.55% 7.91%
Source: Bloomberg, December 31st2011
2. Will 2012 be abetter year ?
3. Market Outlook
1. Update on CY 2011
-
8/13/2019 Mirae India Outlook 2012
3/18
2
For Professional Investors Only
Returns 3 Month 6 Month 1 YearSENSEX -6.07% -17.99% -24.64%
NIFTY -6.45% -18.12% -24.62%
BSE 200 -8.75% -20.04% -26.95%
BSE Midcap -16.23% -25.08% -34.19%
BSE SmallCap -19.34% -31.96% -42.61%
BSE Health Care 0.05% -8.24% -12.83%
BSE Realty -21.97% -31.89% -51.84%
Bankex -15.64% -28.61% -31.59%
BSE Consumer Durables -16.93% -20.58% -16.87%
BSE Oil & Gas -11.36% -18.23% -28.98%
BSE PSU -14.03% -25.49% -32.72%
BSE Power -15.50% -31.24% -39.91%
BSE Auto -4.17% -7.44% -20.44%
BSE FMCG 3.19% -0.25% 9.53%
BSE Metal -15.48% -38.30% -47.19%
BSE IT 9.04% -5.71% -15.72%
Year 2011 has been a challenging year for Indian Equity Markets. Investors have seen the Sensex correct by 24.
6%. In fact the highest level on the market (Sensex) has been 20,561 hit on the 1st trading session. The equity
market hit a 28 month low on 20th December (15,175).
The broader market corrected more in 2011 with the BSE Midcap and Small cap corrections of 34% and 43% re
spectively.
BSE FMCG is the only Sector which has delivered positive returns of 9.53% in 2011.
The laggard sectors for 2011 were BSE Real Estate and BSE Metals with 52% and 47% correction.
Indian Market IndicesCY 2011
Source: Bloomberg, 30th December. 2011
2. Will 2012 be abetter year ?
3. Market Outlook
1. Update on CY 2011
-
8/13/2019 Mirae India Outlook 2012
4/18
3
For Professional Investors Only
12,000
13,000
14,000
15,000
16,000
17,000
18,000
19,000
20,000
21,000
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
SensexLevel
RBI hikes
Repo &
Reverse
Repo by
25bps
Japan
Earth
Quake
China hikes
RRR by 50 bps
EU Summit: 50%
debt written down
for Greece, Bank r
ecap & EFSF
leverage
FDI in Multibrand
retail and 100%
in single brand
retail
INR vs USD at
record lows
FY12 Union
Budget S&P downgrades US
credit rating to AA+
Land Acquisition Bill
approved by Cabinet
Cabinet Approves
Mining Bill
FDI in Multiband
Retail put on hold28 month lowof 15,175
Indian Markets in 2011 at Glance
Highest level in 2011
Source: Bloomberg, December 31st2011
2. Will 2012 be abetter year ?
3. Market Outlook
1. Update on CY 2011
-
8/13/2019 Mirae India Outlook 2012
5/18
4
For Professional Investors Only
Does 2012 Hold Any Hope for Equity Investors???
Yes
No
Not Sure
2. Will 2012 be abetter year ?
3. Market Outlook
1. Update on CY 2011
-
8/13/2019 Mirae India Outlook 2012
6/18
5
For Professional Investors Only
History has shown to Indian investors, that whenever the equity markets have delivered negative returns in a
calendar year (as per table below), the investor is handsomely rewarded over the next 2 years.
Source: Bloomberg. Data as on 20th December 2011.
Note: The table above shows the returns generated if the investor had made investment on 1stJanuary ofthe next calendar and remains invested for 2 year.
This will be only the 8thyear (out of 32 years) in the Sensex history since 1979 that the Sensex has delivered
negative returns above 1%.
History had shown the average absolute returns generated over the next 2 years is 56% (CAGR returns of 24.98%
, whenever the market has delivered negative returns in the calendar year.
There is no guarantee or assurance that the trend depicted above with respect to returns will be reflectedin the coming years as well.
Year Calendar Year ReturnsAbsolute Returns after
2 year
1979 -4.3 91.7
1987 -15.7 76.2
1995 -20.9 17.7
1998 -16.5 30.1
2000 -20.6 -15
2001 -17.9 79
2008 -52.4 112.5
2011 -24.6 ???
Will History Repeat Itself
2. Will 2012 be abetter year ?
3. Market Outlook
1. Update on CY 2011
f
-
8/13/2019 Mirae India Outlook 2012
7/18
6
For Professional Investors Only
Will History Repeat Itself 2001 vs. 2011
Year 2001 Year 2011
2001 2011Average Inflation (WPI) 7.10% 9.60%
Average Interest Rates (1 yr. Govt Sec Yield) 7.95 8.09
Combined Fiscal Balance (FY02) -9.50% -8.30%
Equity Market Returns - 17.9% - 24.6%
INR change (2 Year) -10.80% -14.80%
Year 2001 was a year of high inflation, high cost of debt and limited room for Government same as year
2011. The currency also behaved in same way in 2001.
After consolidation in market in 2002, Investors enjoyed a very secular bull from 2003 to 2007, where the markets moved from 3,000 odd levels to 21,000 levels in 4 years...will 2012 onwards reflect what h
appened from 2002 onwards.
10,000
12,000
14,000
16,000
18,000
20,000
22,000
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01
2001 2011
Sensex Performance in year 2001 and 2011
2. Will 2012 be abetter year ?
3. Market Outlook
1. Update on CY 2011
Source: Data from ACE MF& Bloomberg, for all data December 31st2011
E S d
-
8/13/2019 Mirae India Outlook 2012
8/18
7
For Professional Investors Only
Economy Scorecard
The above tables plots the current economic environment in India based on few economic parameters.
The 2012 table highlights the change we expect in the economic parameters in CY 2012. A number of economic
concerns will recede and hence we feel the current Indian economic environment will change for the better in
CY 2012.
The improvement in the overall economic environment will definitely have a very positive impact on the equity
market sentiments.
How 2011 looked like
How 2012 may look like
The Good The Not So Good The Bad
FDI Flows GDP Growth Fiscal Deficit
Remittances Corporate Earnings InflationService Sector Growth Banking Sector NPA Interest Rates
FII Flows Currency Depreciation
Economic Reforms
Industrial Growth
Current Account Deficit
The Good The Not So Good The BadRemittances GDP Growth Fiscal Deficit
Service Sector Growth Corporate Earnings Current Account Deficit
Banking Sector NPA Inflation
Interest Rates
Currency Depreciation
Industrial Growth
FII Flows
FDI Flows
2. Will 2012 be abetter year ?
3. Market Outlook
1. Update on CY 2011
I fl ti Sh i Si f E i
-
8/13/2019 Mirae India Outlook 2012
9/18
8
For Professional Investors Only
Inflation Showing Signs of Easing.
With respect to monetary policy, we believe that the RBI is likely done for the time being with rate hikes. Inflation is expecte
d to come down from the current 9.1% to about 7% by March 2012 on the back of falling commodity prices and base effect
Inflation as measured by the WPI has been sticky at 9%+ levels for the last 20 months, however, MoM increases do
indicate abating pressures.
Food inflation which has been a key culprit in keeping overall inflation at elevated levels for an extended period. With food
Inflation falling faster & hitting a 6 year low of -3.36% for week ended 24th December we feel it will have a very positive
impact on WPI. (Food Inflation has 14% weightage in WPI). (Source: data points taken from RBI.org)
Easing growth rates across the world, along with absence of additional QE measures, augurs well for a cool off in
commodity prices and should provide relief on imported inflation.
Once inflation cools down the focus of the central bank will be on the slowing growth in the economy & we believe thatreduction in WPI will set the tone for reversal of monetary policy regime in CY12-13.
Source: Office of Economic Adv isory, Bloomberg
2. Will 2012 be abetter year ?
3. Market Outlook
1. Update on CY 2011
(% yoy)
GDP G th d i b d ti C ti
-
8/13/2019 Mirae India Outlook 2012
10/18
9
For Professional Investors Only
GDP Growth driven by domestic Consumption
We see a GDP growth rate in India of around 7% to 7.5% for fiscal year 2012 (March-end) and around 7% fofiscal year 2013.
The growth rates forecasts for 2012- 13 are lower than in previous years, but India would still be the secondfastest- growing economy in the world after China, with a GDP of at least $1 trillion.
Domestic demand will be the key driver for GDP growth.
2010 2011E 2012E 2013E
US 3.0 1.7 1.9 1.9
Japan 4.0 -0.4 1.8 1.3
Euro Area 1.8 1.5 -1.2 -0.2
Australia 2.7 1.5 3.7 4.0
Switzerland 2.7 1.9 1.0 1.2
India 8.5 7.1 7.0 7.7
China 10.4 9.1 8.4 8.6
Korea 6.2 3.6 3.7 4.4
S. Africa 2.8 3.1 2.9 4.0
Brazil 7.5 3.2 3.5 4.5
Russia 4.0 4.0 2.5 4.2
Source: CSO, CIRA Estimates; 31stDecember 2011
Though growth in urban India has been slowing down because of global interlinking, but rural Indi
continues to grow on back of trickle-down effect of massive social sector spending, appreciation (an
liquidation) of latent assets (land, gold etc.). This coupled with buoyant agriculture production is likely to
keep the rural consumption strong.
2. Will 2012 be abetter year ?
3. Market Outlook
1. Update on CY 2011
-
8/13/2019 Mirae India Outlook 2012
11/18
10
For Professional Investors Only
Other Possible Positive Triggers
Elevated Inflation for an extended period of time led to aggressive monetary policy and took toll on
growth rates. However, inflation is now exhibiting signs of reversal and with the right signals from
the central bank along with improving liquidity will have a positive effect on India Inc. especially on
capex implementation front and also mitigate worries on NPA formation for the banking system. While runaway rupee depreciation is a worrisome factor, it is largely linked to global pain rather
than India specific factors and thus would normalize in coming few months.
The political deadlock and policy making log-jam seems to have dealt a severe body blow to India
Inc.scapex cycle.
Some of the key bills critical for accelerating Indiasgrowth cycle are reforms like GST, Direct TaxCode, Companies Act, FDI in multi-brand retailing, electricity distribution reforms. If the
government starts the economic policy reforms it will be the game changer and will change the
overall sentiments for the equity market.
2. Will 2012 be abetter year ?
3. Market Outlook
1. Update on CY 2011
G S & S R l ti hi
-
8/13/2019 Mirae India Outlook 2012
12/18
11
For Professional Investors Only
G-Sec & Sensex Relationship
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
-1
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
Dec-03
May-04
Oct-04
Mar-05
Aug-05
Jan-06
Jun-06
Nov-06
Apr-07
Sep-07
Feb-08
Jul-08
Dec-08
May-09
Oct-09
Mar-10
Aug-10
Jan-11
Jun-11
Nov-11
Sensex
Percentage(%)
10 yr - 1 yr GSec SENSEX (RHS)
2. Will 2012 be abetter year ?
3. Market Outlook
1. Update on CY 2011
Source: Bloomberg, December 31st2011
R ili t US M D t
-
8/13/2019 Mirae India Outlook 2012
13/18
12
For Professional Investors Only
Resilient US Macro Data .
Payroll gains in the U.S. improved which helped push the jobless rate down to 8.6 percent, the lowest level sin
ce March 2009. Employment climbed by 120,000 workers in November, with more than half the hiring coming f
rom retailers and temporary help agencies, after a 100,000 gain the prior month
US home building climbed to the highest level in 19 months during November as home construction grew 9.3%
to a seasonally adjusted rate of 685,000 from October, the results being better than the forecast of 0.3% rise.
Newly issued building permits, a gauge of future construction too rose 5.7% from a month earlier against a fore
cast of 1.7% fall by economist.
Other better-than-expected consumer confidence & macroeconomic data from US
- US Conference Board says its consumer confidence index rose almost 10 points to 64.5 in December, u
p from a revised 55.2 in November
- Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to a 6
month high of 67.7 in December from 64.1 in November
- US ISM manufacturing index rose to 52.7in November from 50.8 in October.
Housing market improvingManufacturing on rebound
Source: Bloomberg as of December 30, 2011
Unemployment trending downwards
2. Will 2012 be abetter year ?
3. Market Outlook
1. Update on CY 2011
Valuation Check
-
8/13/2019 Mirae India Outlook 2012
14/18
13
For Professional Investors Only
PE Multiple
The PE for the Indian Equity Markets has been moving lower across CY 2011. The forward P/E of the market is
close to 12. The 10 year average forward PE multiple for Sensex is 14.7 times earnings (20% discount to the 10
year average). At current valuations; the risk reward looks favorable for making fresh investments.
Valuation Check
Source: Bloomberg; 31stDecember 2011
FY13E FY14EEPS 1325 1470P/E (x) 11.72 10.56
2. Will 2012 be abetter year ?
3. Market Outlook
1. Update on CY 2011
Sensex
Levels
Valuation Check
-
8/13/2019 Mirae India Outlook 2012
15/18
14
For Professional Investors Only
Valuation Check
From FY04-05 till FY07-08, Sensex companies have shown a robust earnings growth of nearly 24%. This laid
the foundation for the bull market rally from 2004. EPS grew from twice during this period, while the equity markets rallied from 6,000 odd levels to 21,000.
Earning growth has been muted from FY 09-11 due to emergence of global financial crisis and companies trying
to adjust to the dynamic global and domestic environment. Despite a robust growth in revenues in FY12, corpor
ate earnings have been under pressure because of higher raw material prices and the interest rate burden.
As per Bloomberg estimates, earnings growth will go back to the early teens over the next 2 years (FY 13, 14) w
hich will support the attractive equity market valuations. The positive catalysts for FY 13 will come from decliningraw material costs and interest rates.
FY13E FY14EEPS 1325 1470EPS growth (%)
13.76 10.98P/E (x) 11.72 10.56Div. yield (%) 2.03 2.26P/B (x) 1.88 1.79
Source: Bloomberg; 31stDecember 2011
2. Will 2012 be abetter year ?
3. Market Outlook
1. Update on CY 2011
Valuation Check
-
8/13/2019 Mirae India Outlook 2012
16/18
15
For Professional Investors Only
Sensivity Analysis
The Sensivity Analysis will help provide the valuation levels the market can trade at, based on future ear
nings of Sensex earnings and forward PE ratio .
Valuation Check
Source: Bloomberg; 31stDecember 2011
12 14 16 18 20
8% 15,098 17,615 20,131 22,648 25,164
10% 15,378 17,941 20,504 23,067 25,630
12% 15,658 18,267 20,877 23,486 26,096
14% 15,937 18,593 21,250 23,906 26,562
16% 16,217 18,920 21,622 24,325 27,028
18% 16,496 19,246 21,995 24,745 27,494
20% 16,776 19,572 22,368 25,164 27,960
Sensi tivity Anal ysi s
Sensex Levels at Different Earning Growth Assumptions and PE Multiples
EPSGrowth*
PE***
**Base for Earning growth is Bloomberg Sensex Estimates for FY12 EPS of 1,165*Earning Growth CAGR for FY13
2. Will 2012 be abetter year ?
3. Market Outlook
1. Update on CY 2011
-
8/13/2019 Mirae India Outlook 2012
17/18
16
For Professional Investors Only
Disclaimer
Statutory Details: Trustee: Mirae Asset Trustee Company Private Limited; Investment Manager: Mirae Asset Global Investments (India) Private Limited (AMC); Sponsor: Mirae Asset Global Investments Company Limited.
Risk Factors: Mutual fund investments are subject to market risks and there is no assurance or guarantee that the objectives of the scheme will be achieved. As with any investment in securities, the Net Asset Value (NAV) ofthe units issued under the Schemes can go up or down depending on the factors and forces affecting the capital markets. Investments in mutual funds are prone to risks of fluctuation in NAVs, uncertainty of dividend distributions etc.Past performance of the Sponsor / AMC / Mutual Fund does not guarantee the future performance of the Schemes of Mirae Asset Mutual Fund. The sponsors are not liable or responsible for any loss resulting from the operation of the fund beyond the initial contribution made by them of an aggregate amount of Rupees One Lakh towards setting up of t
he fund. The past performance may not necessarily be an indication of future results and may not necessarily provide a basis for comparison with other investments. The names of the schemes does not in any manner indicate either the quality of the schemes or its future prospects or returns. Investors in the scheme are not being offeredany guaranteed / indicative/ assured returns. Please see "Risk Factors", "Scheme Specific Risk Factors and Special Con
sideration" and "Right to limit redemptions" in the Scheme Information Document (SID). Please read the Scheme Information Document (SID) and Statement of Additional Information (SAI) carefully before investing . Scheme Information Document / Key Information Memorandum cum Application form are available at AMC offices/AMC web-site www.mi
raeassetmf.co.in/ Investor Service Centre / Distributors on request.
Certain information contained in this document is compiled from third party sources. Whilst Mirae Asset Global Investme
nts (India) Private Limited has to the best of its endeavour ensured that such information is accurate, complete and up-to-
date, and has taken care in accurately reproducing the information, it shall have no responsibility or liability whatsoever f
or the accuracy of such information or any use or reliance thereof. This document shall not be deemed to constitute any
offer to sell the schemes of Mirae Asset Mutual Fund. Mirae Asset Global Investments (India) Pvt. Ltd/ Mirae Asset Trust
ee Co. Pvt. Ltd./ Mirae Asset Mutual Fund/ its Directors or employees accepts no liability for any loss or damage of any ki
nd resulting out of the unauthorized use of this document.
http://www.miraeassetmf.co.in/http://www.miraeassetmf.co.in/http://www.miraeassetmf.co.in/http://www.miraeassetmf.co.in/http://www.miraeassetmf.co.in/http://www.miraeassetmf.co.in/http://www.miraeassetmf.co.in/http://www.miraeassetmf.co.in/http://www.miraeassetmf.co.in/http://www.miraeassetmf.co.in/ -
8/13/2019 Mirae India Outlook 2012
18/18
17
For Professional Investors Only
Thank You