Research Reports

IPM volume growth may not bounce back to earlier levels of 5-7% and may sustain around 2-3%

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Passenger vehicle domestic volumes grew in lower single digit (~2.5%) YoY with share of SUV segment continuing to stay higher

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Surprise cut in APM allocation in the absence of preparedness lowers CNG competitiveness and puts pressure on margins and growth

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Q2 volume push by 2W and passenger vehicle segments; commercial vehicle awaits strong trigger; tractors a mixed bag

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Volume driven by large companies; small, regional companies take a severe hit; realisation weakens 7% YoY on weak seasonal demand

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Domestic tiles realisation to remain under pressure in the near future due to continued weak tiles exports (-24.1% YoY in Sep’24)

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Tepid quarter on intense competition in a weak demand environment and extended monsoon

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We interpret near-term pressure points for India’s steel majors as elevated steel exports and weak auto demand in India

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Passenger vehicle volumes grew a high single digit (~7%) YoY with the SUV segment’s share continuing to stay higher

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Cement prices in Sep’24 fell by 12% YoY but stayed flat MoM as the monsoon had a relatively extended spell

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Q2 miss due to higher inventory losses and LPG under-recovery; underlying R&M margin strong on high auto fuel margins

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Domestic tiles realisation to remain under pressure in the near future as tiles exports fell to a 22-month low level in Aug’24

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Alcoa’s result confirms significant upside from higher prices and modest impact of lower metal prices for Indian players in Q2FY25

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2QFY25E to report another healthy quarter driven by good traction across geographies, cost rationalisation leading to margin increment

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Demand conditions were mixed in Q2FY25 as healthy demand was observed in West/East/Central and weak in North/South regions

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The Indian pharma market is shifting from generics to innovation, resulting in higher focus on R&D

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Aggregate 2W volume growth likely to remain strong at ~11% YoY for our coverage in Q2 with healthy margin recovery of 120bps

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2QFY25 sales trends likely similar / marginally better vs the Jun quarter; with slight pickup in the latter part of Sep, coinciding with the harvest

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While earnings downgrade cycle has stalled post 1QFY25, we do not foresee material upgrade to consensus for FY25 post 2Q

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Q2 likely to reflect healthy YoY volume growth for both CGDs and gas utilities but seasonal sequential pullback for the latter

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Q2FY25 demand to be weak owing to monsoon seasonality (lull in new real estate projects) and limited infrastructure demand announcements

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Q2FY25 soft for consumer durables; but wires and cables shine led by government and private infrastructure spending

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Our building materials universe’s revenue likely to grow at a muted pace for the seventh consecutive quarter due to weak demand

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Q2FY25 likely to turn out to be the second weakest quarter in terms of EBITDA profit over the past four years for our Ferrous coverage

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Credit growth likely to remain broad based, while moderation in growth likely to ease C-D ratio for the entire system

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Passenger vehicle volumes grew in higher single digit (8%) YoY with share of SUV segment continuing to stay higher

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Bathware demand environment remains soft in Q2FY25 on heavy monsoon and slowdown in IHB construction activity

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Cement prices in September 2024 fell by 8% YoY but gained marginally MoM by 2% as the monsoon continued a relatively extended spell

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Domestic tiles realization to remain under pressure in Q2FY25 as tiles exports fell to a 13-month low level in Jul’24

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Responding to steel downcycle, western markets have lowered supplies and inventories and swiftly instituted trade defense measures

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Contrasting commentary on rural recovery. Dabur’s optimism reflects HPC/healthcare exposure while TCPL’s conservatism likely reflects salt

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China steel demand remains in a downward trend as market transforms from construction to manufacturing led demand

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MDF industry’s margin pressure to persist over the next 4-6 quarters as industry to operate near trough level over FY25E-FY26E

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Industry asking for proactive tariffs protection against a potential surge in imports from China and affordable domestic tax environment

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Dealer checks suggest healthy demand in the 125-200cc motor bike segment, indicating customer preference for high-end products

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Strong consumer interest drives demand for high-end electronics, with Voltbek emerging as a key player

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Demand was weak in the Jul-Aug’24 months, but it is likely to improve in the near future as resin prices appear to be near bottom levels

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Passenger vehicle growth steady and expected to deliver healthy pickup driven by preference for the SUV segment

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Government incentives and industry reforms are paving the way for significant growth in the Electronics Manufacturing Services sector

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Cement prices in Aug’24 fell by 9% YoY but were steady MoM as the monsoon continues to grip many regions

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We highlight relevant read-across for Indian ferrous players from BHP’s Economic and Commodity Outlook and FY24 (ending Jun) results

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With 3/4th of Southwest monsoon over, agri outlook has improved with a decline in “deficit rain” and a rise in “normal rain” states

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Credit growth remained modest on slowdown in retail loan, C/D contracted a bit; NIMs under pressure due to increase in cost of funds

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Our consumer durables universe grew 32% YoY in Q1, fueled by strong demand in cooling products, EMS, and cables

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Tiles exports fell sharply by 15.4% MoM in Jun’24 due to the impact of high ocean freight rate

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Volumes listless due to state elections, extreme heat conditions, and heavy rainfall in the eastern region. Realisations fell ~5% YoY

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Tepid quarter on intense competition in a weak demand environment; pipe remains the best performer, wood panel the worst

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Q1 volume steered by 2W and tractor segments despite overall lull in sentiments given the extreme weather and general elections

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After bottoming out in Q1CY24 and some improvements in Q2, markets are again facing challenges from increased China exports

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Halfway through the monsoon, we analyse statewise exposure to agri income and estimate 19% of rural households in deficit SWM

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Indian players to benefit from upside in aluminium and alumina realisations in Q2, according to Alcoa and Rio Tinto’s results

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Iron ore shipment recovery will mean range-bound iron ore pricing in H2CY24, despite weaker production recovery so far

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Aggregate PV revenue growth likely to remain strong at 14% YoY for our coverage in Q1 with healthy margin recovery of 130bps

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Refining, marketing and gas distribution margins have normalised in Q1 and are likely to still remain in the healthy range

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We expect marginal sequential improvement in sales growth for most FMCG companies in our coverage due to slight pickup in rural

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Q1FY25 demand likely to be weak due to limited infrastructure demand, extreme summer and lull in new real estate project announcements

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Credit growth remains healthy with broad-based growth supported by wholesale segment, while some moderation in retail book is expected

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After multiple quarters of earnings downgrades, 1QFY25 will likely see a pause. We think it is too early to call if the cycle has turned up for good

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We expect aggregate EBITDA to decline by 13% sequentially for the four steel majors on seasonal pullback in volume and margin contraction

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Q1FY25E to be strong given the severe heat wave across the country; cooling products to outperform

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Our building materials universe’s revenue to grow at a moderate pace for sixth consecutive quarter on elections and extreme heat wave

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Recent trading updates from FMCG companies imply a recovery in rural. The pace of recovery appears to be slow

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Positive for plastic pipe; companies with high exposure to PVC polymer to benefit the most in the near term

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Ferrous steel stock valuations are now higher than the 10-year average as well as current valuation of their global peers

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Crude price likely to remain range-bound against expectations of spike in H2CY24

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Tepid quarter on intense competition in a weak demand environment; pipe segment remains the best performer, wood panel the worst

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Q1FY25 saw dealers experiencing a surge in AC and fan sales driven by the scorching heat and peak summer; premiumisation continues

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We compare MAHGL and IGL’s volume growth, margin trends, profitability and valuations

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ArcelorMittal’s (MT) Q1CY24 results confirm bottoming out of steel margins in the western world

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FY24 saw strong capacity addition in renewables, ending the year with 18.5GW, though lower than the targeted addition of 20GW

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We summarise key takeaways from our interaction with Director of Securities of Valin Steel, the seventh largest steel producer in China

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India steel prices to improve modestly with kick-off of restocking season in Sep, met coal price to ease further, iron ore range bound

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Credit growth remains healthy, driven by retail segment

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Our building materials universe revenue to grow at a tepid pace for the fifth consecutive quarter on weak demand and lower realisations

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Pressure on margins for IT companies to continue in the medium term, in our view, given dominance of cost take-out projects

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VNB margins expected to stay under pressure for life insurers; SBI Life (TP Rs 1,970) remains our top pick

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Manganese prices have bottomed out in India during Dec’23, in line with global trends, with domestic major MOIL effecting hikes

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India demand outlook healthy for steel and aluminium; although aluminium demand less likely to be impacted by election

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CERC retains most of the norms specified in the draft tariff regulations in letter and spirit, ensuring stability of policy

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Aluminium price likely to be range-bound in the near term, with demand recovery likely to be back-ended in CY24

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We hosted 10 corporates at our ‘Unlocking Insights’ Conference spanning the capital goods, power and durables sectors

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Power plant PLFs higher at 72.3% in Jan’24 and 68.5% YTD; government raises peak demand estimate 5% to 384GW by 2032

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MF AUM crossed Rs 50tn in 9MFY24, marking a new high for the industry

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We interpret the BHP outlook to mean continuing improvement in China’s steel demand-supply balance through CY24…

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Our consumer durables universe grew 25% YoY in Q3, once again led by demand for EMS, cables and wires

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Q3 revenue for our capital goods coverage grew 18% YoY (+15% ex-LT) on strong execution; EBITDA margin slipped 40bps (20bps ex-LT)

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Softer fuel (pet coke) cost aided 560bps YoY EBITDA margin expansion on average for our cement coverage in Q3

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Tepid demand climate dampens building material performance in Q3; pipe segment remains the best performer, wood panel the worst

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SBI Life, our top pick, continues to dominate peers by way of superior growth and market share gains in Q3FY24; LIC posted a recovery

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Q3 volumes steered by PV sales and 2W recovery on the back of festive/ wedding season demand and rural pickup

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New draft tariff norms ensure stability of existing power assets and recognise risk-reward across asset classes

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Q3 in line with flattish revenue growth YoY and healthy operational performance across our coverage universe

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MT attributes weak Q4 to severe destocking in several markets; looks for spread recovery in Q1 from unsustainably low levels

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Peak power demand for December at 214GW with no demand unmet; thermal PLFs ~200bps above target

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Budget pegs fiscal deficit at 5.8% for FY24 (vs. 5.9% BE) while setting a target of 5.1% for FY25; retains 4.5% guidance for FY26

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Guiding for 20% annual growth in both FY24 and FY25 and planning investments to further extend growth runway

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India’s building materials industry is on a strong footing given the anticipated revival in real estate cycle and rising organised share

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Q3FY24 presented weak demand trends like the previous quarter due to subdued volume recovery

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Healthy credit offtake reported in Q3, driven by retail and SME/MSME segments and supported by tick-up in wholesale loans

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Global LNG prices showing initial signs of easing; improved availability likely to make the fuel competitive for Indian buyers

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SBI Life forecast to deliver strong growth and steady VNB margins in Q3; remains our top life insurance pick

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A combination of strong underlying domestic economy coupled with a visible increase in consumption of mass-premium items will likely be the dominant driver of market in 2024, in our view

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Peak demand for November at 205GW, declining 8% MOM with the onset of winter; Thermal PLFs up ~500bp YoY

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Europe and US markets are seeing initial recovery from low margins, but a pick-up in demand is needed for next leg of recovery

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Passenger vehicle demand healthy across segments (UVs and compact cars) and is expected to continue

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Despite recent rally in OMCs, we believe stock prices are yet not fully reflecting long-term sustainable marketing margins

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We followed up our Southern Sojourn with on-ground channel checks in India’s eastern states of Odisha and West Bengal

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Dealers saw mixed demand across products during festive-cum-wedding season from September to November

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India to add 20GW of RE capacity in FY24 and power producers now pursuing hybrid and RTC solutions, per ICRA

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MAAUM of MF industry grew to Rs 49tn at end-November from Rs 39tn in Mar’23, closing in on Rs 50tn mark

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Sectoral credit card spends rose 27% YoY over Apr-Oct’23, with AXSB racking up the most market share and SBICARD holding steady

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India’s power generation capacity grew 4% YoY in October to ~425GW, with solar energy topping the additions at 10.4GW

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Our FMCG coverage saw muted volume growth in Q2 due to heightened regional competition and delayed rural recovery

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Higher demand for ULIPs than non-par plans narrowed VNB margins for private life insurers in H1; LIC bucked the trend

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Q2 volumes steered by PV sales while 2W segment remained tepid on slow (but steady) rural growth

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Softer fuel (pet coke) cost aided 600bps YoY EBITDA margin expansion on average for our cement coverage in Q2

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Q2 revenue for our capital goods coverage grew 17% YoY (+11% ex-LT) on strong execution; EBITDA margin stayed flat (+60bps ex-LT)

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Q2 an uneventful quarter for the power sector with flat revenue growth YoY for our coverage universe

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Our consumer durables universe grew 20% YoY in Q2, once again led by demand for EMS, cables and wires

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Most major global indices slipped 2-4% in October; Nifty 50 shed 3% while Chinese stocks lost another 3-4%

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Cement prices hiked by Rs 15-20/bag in the north, west and central regions in recent weeks, taking cues from the east and south

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WSA outlook points to resilient steel demand with stabilisation in China, lowering the downside risk to steel margins

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Aggregate PV revenue growth likely to remain strong at 15% YoY for our coverage in Q2 but margin pressure set to continue

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Volume recovery delayed due to food inflation and weak rural sentiment amid an erratic monsoon

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Green energy to dominate capacity creation but thermal power usage to remain sticky as India seeks to plug supply shortages

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Cement dispatches robust in Q2, rising 15% YoY on average for our coverage companies

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Q2 saw healthy systemic credit growth of 19% YoY led by retail and SME/ MSME segments and supported by recovery in MFI

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Dealers saw a pickup in sales of ACs and fans in Q2FY24 due to unusually dry weather; premiumisation continues

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Sector EBITDA to remain range-bound with JSTL likely to retain momentum, TATA faltering in Europe and SAIL set to recover from Q1 weakness

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Early AUM data points to strong Q2 profits for BAF – our top pick among NBFCs

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Nifty 50 outperformed most global indices in September, rising 2%; US indices slipped 4-5%

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YTD data signals steady demand shift toward high-end products, fuelling a raft of premium launches across segments

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GNA comes into effect on 1 October but key aspects of new regime remain ambiguous

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Sectoral credit card spends grew at robust 27% YoY in 5MFY24; top 4 players constituted 75% share

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Our recent visit to South India revealed compelling on-ground insights from local FMCG and durables dealers

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Global steel margin could improve in Q4CY23 with seasonal demand uptick in Sep-Oct and potential production cap in China

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Commentary from global ferrous majors continues to point to demand stabilisation in China

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Nifty 50 fell 2.5% in August, largely in line with other major global indices; Chinese Indices were the worst performers

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India to account for 3% of global battery cell market by 2030, with planned production capacity of ~150GW hours

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IPM saw subdued 6% YoY growth in July as sluggish demand for acute therapies (+4%) offset stronger chronic revenue (+10%)

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Q1 a middling quarter for the consumer durables sector, barring cables, wires and EMS players

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FMCG sector grew 12.2% YoY in Q1 with volumes rising 7.5%; regional competition intensified during the quarter

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Our capital goods coverage grew 30% YoY in Q1 on strong execution (+20% ex-LT); EBITDA margin stayed flat (+260bps ex-LT)

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Weakness in consulting, BFSI, consumer, hi-tech and telecom verticals led to deferral of order bookings

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Only a third of AA’s 42% QoQ EBITDA decline in Q2CY23 attributable to market factors relevant to Indian companies

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Q1FY24 likely to be a bump in the road to recovery with a 30% QoQ pullback in aggregate EBITDA forecast for our coverage

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Demand environment held steady in Q1; divergence between pricing and volumes has narrowed

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Expect steady system credit growth in Q1 and recovery in deposits due to rate realignment and discontinuation of 2,000-rupee notes

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Despite seasonality, Q1FY24 growth is likely to remain weak while margins are unlikely to surprise positively

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The Indian solar capacity to reach 100GW in a year from 68GW currently; further ramp up to 280GW likely by 2030

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India’s startup industry looks poised to triple to US$ 1.5tn by 2025-26 as foreign investors flock to the space

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ACN narrowed its FY23 revenue growth guidance to 8-9% YoY CC from 8-10% due to a material decline in consulting engagements

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Encouraging macro data validates our view of rural recovery in FY24; upbeat corporate commentary lends further credence

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Decline in aggregate Q4FY23 revenue across verticals and regions suggests the cracks are beginning to emerge

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Fairly valued stocks deliver better returns than both over- and undervalued scrips, per our analysis of forward PE and stock returns

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IPM grew 11.3% (MAT) in May’23 led by anti-infective, respiratory and pain therapies; derma, VMN and anti-diabetic remained sluggish

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India is progressing on the 15bn target of ethanol production, but delivery target could be delayed by a couple of years beyond ESY25

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Consumer Staples: Agri expert call – El Nino to have negligible impact

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Slow start for the ceramics sector in FY24 but export traction, big projects and demand for large tiles to support revenue growth

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Demand remains affected by slower decision-making, caution around spending and project ramp-downs

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Consumer staples players saw a robust Q4 given a healthy price-volume balance; margin expansion continues

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Topline growth improves in Q4 amidst demand concerns, though margins remain sedate

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Strong execution aided 14% YoY revenue growth for our capital goods coverage in Q4FY23 (25% ex-LT); gross and EBITDA margins robust

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India’s YTD underperformance against global markets appears to be reversing, with outperformance in May

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SEBI moots all-inclusive TER with new AUM-based slabs to make mutual funds more transparent

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MT’s Q1 print confirms global steel margin recovery backed by a strong revival in shipments with the end of destocking

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PV sale volumes growth continues in April as compact cars lent a helping hand with a strong 27% YoY revival; SUV growth tapered off

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Baosteel guides for continuation of production discipline in CY23 and only a modest decline in raw material prices

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India has underperformed most large markets since Jan’23, though this trend did reverse in April

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PV revenue growth likely to remain strong in Q4 at ~20% YoY for our coverage but margin pressure set to continue

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Macro data from China confirms ongoing recovery in steel demand with scope for pick-up in the peak June quarter

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Alcoa’s Q1CY23 EPS narrowly missed consensus; aluminium posted higher sequential improvement than alumina

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MF industry MAAUM grew 6% in FY23 driven by equity and passive funds while debt outflows continued

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Cement dispatches robust in Q4, advancing ~20% YoY for our coverage companies

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Visible uptick in rural demand off a low base, though urban centres expected to see relatively higher volume growth in Q4

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IPM posted 8% YoY MAT growth in Mar’23 led by the gastrointestinal, cardiac and pain therapies

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SEBI’s March meeting showcased its firm intent to regulate fees charged to MF investors, sending tremors through the AMC industry

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Industry volumes indicate a shift towards high-end vehicles, especially in the PV segment

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Steel EBITDA recovered 36% QoQ in Q4 on volume pick-up; erasure of domestic price premium paves way for further price uptick

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Flagging demand and unseasonal rains in March dampen our Q4 outlook for consumer durables companies

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EPC players likely to maintain execution momentum in Q4 while product companies could see weaker toplines as they battle chip shortages

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Global IT services companies expect an anaemic Mar’23 quarter and a weak CY23; Indian players foresee near-term pressure over Apr-Sep

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Demand for fans falls short of dealer expectations post BEE rating transition; outlook cautious

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Expect SBI Life to deliver continued cost efficiency and high margins in Q4; remains our top pick among life insurers

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IPM grew 6.7% YoY in Feb’23 (MAT) led by gastro, cardiac and pain therapies; anti-infectives, respiratory and VMN sales lagged the market

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Green shoots visible in rural markets (~40% of FMCG industry volumes) after a prolonged slowdown; policy measures to lend a further boost

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Our analysis indicates that India is witnessing mass premiumisation across several discretionary categories

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We summarise key takeaways from our interactions with ArcelorMittal (MT NA) and Alcoa (AA US)

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Despite the inflationary environment and global economic slowdown, the outlook on tech spending budgets remains upbeat

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India’s decadal per capita power consumption grew 3.6% vs. the long-term mean of 6% and ~14% post-liberalisation

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Aluminium prices to remain in a tight range of US$ 2,300-2,500/t in H1CY23, as per our global channel checks

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Buoyant commentary from global capital goods players is likely to rub off on Indian companies via potentially higher sourcing

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Differentiated value proposition vis-à-vis UPI behind sustained growth in credit cards; spends logged a 25% CAGR over 9MFY18-9MFY23

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Summit largely focused on improving crop yields through efficient use of land and water, right crop selection and mechanisation

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Macro uncertainty inducing cautious IT budget spends and a sharper focus on cost optimisation

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Q3FY23 was a middling quarter with investment themes outperforming consumption sectors; export-oriented sectors did well

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IPM MAT Jan’23 grew 5.2% YoY led by Gastro, Cardiac and pain therapies while anti-infectives, respiratory and VMN lagged

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Strong execution aided 18% YoY revenue growth for our capital goods coverage in Q3 (21% ex-LT) despite supply chain challenges

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Consumer durables players posted modest topline growth in Q3 as volumes moved up but pricing action faltered

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AMNS’ Q4CY22 earnings commentary confirms bottoming out of the global steel sector in the December quarter

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Union budget negative for life insurers as it makes high-ticket purchases of traditional products unattractive from a tax perspective

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Healthy demand growth expected over FY22-FY25 at ~8% CAGR, factoring in a spike during pre-election year FY24

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Budget attempts to balance employment generation, social support, and infrastructure creation while keeping the fiscal glide path intact

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High power demand led by festive season and uptick in economic activity to drive revenue growth

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Fiscal normalisation post Covid expected to remain a core theme of the FY24 budget; fiscal glide path likely to be maintained

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Morbi gas demand under pressure due to significant drop in ceramic manufacturing plant utilisations and initiation of price cuts

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Alcoa’s Q4CY22 EBITDA miss vs. consensus highlights above-expected raw material cost pressure

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IPM grew 6.5% YoY in Dec’22 on MAT basis (12.7% for the month) on the back of price- (5.1%) and launch-led growth (2.3%)

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India’s MF AUM on course for 11% CAGR over FY22-FY27E to ~Rs 64tn as financial savings, product literacy and digitisation rise

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Building blocks largely in place for a faster rise in India’s per capita income but key macro catalysts awaited

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India’s data centre capacity estimated to more than double in 3Y to 1.8GW, a 32% CAGR and cumulative US$ 4.4bn opportunity

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Despite furlough, revenue likely to deliver the pre-covid level but the pressure on existing business continues

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Q3 to remain lacklustre on muted demand post festive season and little scope for price hikes

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Investments resilient led by traction in private capex; manufacturing sector continues to dominate new project announcements

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IIFL Wealth projected to post Q3 AUM/PAT growth of 9%/12% YoY on higher operating leverage and strong recurring flows

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New energy labelling norms effective Jan’23 downgrade the most efficient conventional fans from a 5-star rating to just 1 star

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Steel prices in China saw initial recovery in November and can rise further in Mar/Apr’23 as economic recovery takes hold

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IPM grew 6.2% YoY in Nov’22 on MAT basis (14.5% for the month) on the back of price- (5%) and launch-led growth (2.3%) while volumes fell 1%

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Nifty 50 outperformed US and Japan benchmark indices in November while underperforming the EU

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Rapid rise in India’s credit card spends and cards outstanding over the last five years; millennials to form the next leg of growth

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PNGRB targets unified gas pipeline tariff from Apr’23; adherence to proposed timeline a key monitorable

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Government-led manufacturing push, fast-growing consumer demand and boom in 3PL to bolster logistics sector topline

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India nearing a new capex supercycle, in our view, with private spends likely coinciding with ongoing public outlay

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Nifty 200 earnings came in moderately ahead of consensus in Q2FY23, but only ~40% of companies delivered a beat, similar to Q1

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Aluminium price floor building up with a tighter physical market, but near-term upside capped by high demand uncertainty

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Price hikes deferred beyond Q2 to maintain market share/topline; commodity deflation partly negated by adverse currency

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New Gujarat electronics policy aims to build an ecosystem for electronics manufacturing in India and enable import substitution

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Nifty underperformed global peers in October; banks and IT outperformed, pharma and FMCG lagged

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We summarise the read-across from Alcoa’s Q3 results and our global channel checks

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Baosteel expects steel demand recovery in China to commence from Oct-Nov’22 but weak margins to continue into Q4CY22

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IPM grew 6.6% in Sep’22 on MAT basis (6.2% for the month) led by pricing (4.8%) and launch-led growth (2.5%) while volume shrank 0.8%

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Expect Q2 EBITDA to drop over 50% QoQ for Indian steel majors as margins fall well below mid-cycle levels

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Expect a subdued Q2FY23 owing to weak demand in Jul-Aug’22, though September did see some traction ahead of the festive season

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Expect modest 12% YoY topline growth and flattish net profit for our consumer durables coverage

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Credit card spends clocked in at Rs 1tn for each of the five months of FY23 – a positive surprise; outlook strong

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IIFL Wealth projected to post Q2 AUM/PAT growth of 15%/27% YoY on higher operating leverage, with stronger recurring flows

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Nifty 50 fell 3.7% in Sep’22 against declines of 8.0% for the S&P 500 and 11.8% for the EM aggregate index amid rising recession fears

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Positive momentum in housing and jobs creation augurs well for long-term demand of consumer durables

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Global steel spreads saw sharp compression in Q3CY22, per MT. We expect Indian steel margins to bottom out in the Sep quarter

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Leading pipe companies likely to report high inventory losses in Q2FY23 owing to freefall in PVC prices (trading below Rs 90/kg)

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Crude price has eased amid the global economic slowdown but implementation of European sanctions poses an upside risk in our view

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Vedanta-Foxconn semiconductor JV a key long-term positive for consumer durables sector as it marks the onset of local semiconductor supply

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Rising gas costs compelling Morbi ceramic manufacturers to switch to propane (~10% cheaper), with 300 of 850 units already converted

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Employment generation in India’s formal sector hit a record 1.8mn in July vs. a monthly run-rate of 0.7mn over the past four years, per EPFO

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Housing sales – a key demand indicator for consumer durables – on long-term secular growth path, per RBI pricing data

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India’s new National Logistics Policy aims to improve the logistics ecosystem by addressing policy gaps to lower costs

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India is among the few countries to fulfil its energy intensity mitigation target up to 2020

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Global majors expect China to play a countercyclical role with its ability to run stimulus and support steel demand

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Stiff global headwinds have intensified concerns of a potential bear market among the investment community

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Expect a strong festive season for consumer durables over Aug-Oct (typically 35-40% of annual sales)

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Experts view at the India Steel Conference 2022 suggest 7-8% steel demand growth over the medium term supported by progress on NIP

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China’s Q2CY22 steel sector performance flags subpar demand in Q3 and only a gradual recovery from Q4

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Nifty 50 returned 3.5% in Aug’22, outperforming developed and some emerging market peers

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Consumer durables sector to post sustained volume growth of 5-14% over five years, per Crisil. ACs to grow fastest at ~14%, TVs slowest at ~5%

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Nifty 200 earnings were moderately below consensus, with only 40% of companies delivering a beat in Q1FY23

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Durables players had to negotiate waning demand, RM inflation and SG&A cost normalisation; cooling of RM cost in late-Q1 offered some respite

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Proposed general network access (GNA) policy, which places onus of transmission on buyers rather than generators, a key policy shift

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Nifty 50 rose 8.2% in Jul’22 with mid-caps outperforming large- and small-caps. Index valuation is now broadly in line with historical average

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Imported inflation a concern but India still better placed than global peers; nominal GDP growth equals credit growth

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Alcoa’s aluminium commentary sets a positive tone; management continues to see market in deficit in CY22

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Metals players likely to post sharp EBITDA decline QoQ in Q1 amid double whammy of margin and volume contraction

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Q1FY23 to be exceptionally strong given weak Covid-hit base quarter last year, with summer products set to shine in particular

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Increased input costs in tiles (gas cost) and wood panel (timber) to impact margins; but strong volume growth YoY on low base

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Valuation will likely inch towards long term trend as market resets from an easy liquidity framework to a traditional valuation matrix, in our view

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Aluminium price is being supported by deficits as supply disruptions outpace demand weakness

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Managements of DRRD, ARBP and LAURUS confident of near-term growth drivers but see many moving parts in long run

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FY22 sales of larger companies outpaced medium/small/micro players, per a BOB Economics study of 2,000+ companies across sectors

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Nifty 200 companies largely met consensus estimates at the aggregate level, with only 38% of them managing to beat earnings forecasts

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War, inflation, supply chain disruptions and Covid all dented consumer durable margins, but likely to be transient

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Indian benchmarks underperformed their global peers in May; locally, autos, consumers and financials outperformed

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We analyse sector out/underperformance during the peak and trough phases of a market cycle

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Media industry seeing robust recovery as consumers are returning to theatres in large numbers and spending more

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Levy or increase of export duty to improve domestic availability of steel products, iron ore and pellets

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EESL plans to expand its footprint in B2C retail with products such as smart bulbs, energy-efficient ACs and fans

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Rising gas costs driving Morbi ceramic manufacturers to switch to propane which is 5% cheaper

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Valin Steel’s CY22 outlook points to stable steel margins in Q2 and Q3CY22

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China’s steel demand recovery delayed to end-Q2CY22 but full-year growth outlook still achievable

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Nifty forward P/E is now close to its 5Y average though a modest cut in estimates looks likely post Q4FY22 results

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India’s ongoing power crisis stems from a coal shortage due to inadequate planning; situation to continue till hydropower ramps up

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Iron ore price likely to remain elevated through the June quarter as supply issues persist

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Alcoa’s Jan-Mar quarter EBITDA improved 36% QoQ in aluminium but declined 48% in alumina; guiding for a stronger Apr-Jun quarter

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Europe’s continuing reluctance to enter into long-term contracts for LNG highlights its resolve to green up its energy sources

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With no meaningful FDA approvals, US generic sales growth for our pharma coverage to be tepid in Q4; Russia-Ukraine war to hurt ROW/EM sales

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Gas demand from Morbi ceramic cluster has plummeted but could recover partially in near term with potential increase in propane prices

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Expect a tepid Q4 given volume losses due to the third Covid wave in Jan’22 and elections in Feb’22; some demand pickup seen in March

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We expect most of our IT coverage to perform well in Q4, with 2.5-5% QoQ CC topline growth, and mid-tier players likely to outshine tier-I

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High RM cost to weigh on margins as HDPE/LDPE prices have risen by 9%/17% YoY during Q4FY22

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MDF growth continue to outpace plywood led by strong OEM demand, increasing applications and lower imports

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Global commodity prices (ex-agri) have likely peaked in Mar’22 unless the Russia-Ukraine war escalates and/or sanctions are widened

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Baosteel’s CY22 steel outlook for China points to market stabilisation with modest 2% dip in consumption and lower net crude steel exports

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Return of higher operating costs as global economies reopen and rationalisation of growth guidance have undermined pharma valuations

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The conflict has exacerbated seaborne coal tightness with rail and port logistics disruption in Russia reducing its coal export by 75% in Mar’22

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Russia’s onslaught on Ukraine has plunged a world only just emerging from Covid-led shocks into renewed uncertainty

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OMCs could face near-term pressure on marketing margins from the sharp rise in crude price

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Record US inflation coupled with Russia’s attack on Ukraine induced a significant 4% market correction (Nifty 500) in Feb’22

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HIV vaccine development boosted by inclusion of the mRNA platform following its track record of rapid Covid-19 jab rollout

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84% of Nifty 200 stocks either beat or met Q3 consensus revenue estimates but less than 60% did so at the net income level

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India’s FY23 budget continues a series of themes from previous budgets, including elevated capex outlay and easing of regulations

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Dull festive season and muted participation from rural markets led to subdued volumes in Q3

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Pent-up demand to buoy 2W volumes in FY23E but sales likely to peak within the next decade going by trends in other emerging markets

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Given an improving Covid-19 situation, expect a path towards normalisation of deficit targets

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The organized building material expected to report healthy volume growth/earnings in CY22 with likely pick-up in housing sector

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Due to high base, continued RM inflation, we expect modest net income growth in Q3FY22 in the range of -13% to +20%

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Infosys and TCS outperformed already optimistic revenue growth expectations; Wipro’s 2.3% QoQ dollar revenue growth was a miss

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Demand for IT services strong though significant headwinds also present in the form of high attrition and supply chain disruptions

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Q3FY22 expected to be a strong quarter despite seasonality due to high demand and a robust deal pipeline

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India poised for secular uptick in per capita income as underlying building blocks now largely in place

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MSIL’s domestic sales still hampered by chip crisis (-13% YoY in Dec); TTMT (+50%) and MM (+10%) continue to buck trend aided by launches

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Career launcher (CL) is a leader in MBA and Law segment and is a challenger in Jobs segment

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Growing middle / upper class to drive 4Ws demand. SUVs in particular to grow strongly but competition is higher versus hatchback segment

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Accenture (ACN; Y/E Aug) reported record YoY growth of 27% CC. Deal wins stood at record USD16.8bn.

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Connected people and enterprises are shaping India’s digital economy; structural drivers in place for robust, multiyear growth

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Growth has continued: e-way bills are up 12%, FASTag up 54%, trade up 36% and rail container traffic up 13% in last three months on YoY basis

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NMDC intends to offset pricing headwinds with volume ramp-up in H2FY22

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MSIL’s domestic sales still hampered by chip crisis (-18% YoY in Nov); TTMT (+38%) and MM (+7%) continue to buck trend aided by launches

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An upper middle class growing 2.8x over 2018-30E and low ownership levels will spur new, upgrade and replacement demand for durables

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While demand deceleration in China has resulted in price correction, we expect sharper production cuts to constrain exports

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COP26 ends in Glasgow with emission cut commitments exceeding those made in Paris as part of COP21

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India announces 2070 net zero target, exceeding the global community’s expectation in our view

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4W sales in October hampered by chip crisis though TTMT did well. BJAUT’s 2W volumes fell 17% YoY while 3Ws recovered

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Historical emissions responsible for global warming – US, EU, China and Russia account for two-thirds of greenhouse gas dump

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LNG price to remain well above US$ 15/mmbtu through Q1CY22 even assuming a normal winter and approval of Nord Stream-2 in Q1

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Demand deceleration in China offset by sharp production cuts and their extension into Q1CY22

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Expect moderate 5.1% YoY topline growth from our pharma coverage in Q2FY22 on a high base

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EV 4W/2W share up to 14%/70% in key markets but regulatory support key as costs higher vs. ICE and charging infrastructure lacking

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Stronger QoQ dispatches across auto segments to boost Q2 topline; input cost and semiconductor supply headwinds continue

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Shift in hiring trends due to Covid-19, including increased recruitment from smaller cities

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Expect a robust Q2FY22 for our IT services coverage marked by dollar revenue growth of 3-8% QoQ and 14-40% YoY

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4W sales weak in September due to chip crisis though TTMT did well. BJAUT’s 2W volumes fell 11% YoY while 3Ws recovered

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IndiGrid is an InvIT focused on interstate transmission assets, though up to 25% of its AUM can be in state transmission, solar and storage

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Short-term power price rally led by states vying for 24x7 supply, decline in hydro generation and plant shutdowns

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Once Electricity (Amendment) Bill, 2021, is enacted, states will have little choice but to implement it

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Good Q4FY21 performance from Accenture (Y/E Aug) with guidance of 12-15% CC growth in FY22

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Credit event at Evergrande has potential to spread contagion risk to property sector, though China can possibly manage the situation

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We launch our Ferrous Chartbook to track key global supply and demand drivers for the steel sector

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Rebound in 5G rollout post Covid-led blip; set to reach ~1bn connections globally by CY22-CY23 and unlock growth opportunity for Indian IT

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We attended a webinar hosted by Antaike, a leading Chinese metals information provider

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Warehousing additions in India to clock 19% CAGR over FY21-FY26 fuelled by ecommerce, more localised spaces and manufacturing growth

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Robust outlook on new projects and inorganic opportunities to drive strong growth with double-digit equity IRRs

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RNW targets 18GW of capacity by FY25 through organic and inorganic opportunities as the market consolidates

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PV dispatches in August hit by semiconductor shortage; expected to remain affected in coming months until supply is restored

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Proposed delicensing of distribution positive but key aspects such as wheeling charges and tariff caps will determine the outcome

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IT companies ex-TCS and HCLT outperformed optimistic growth expectations in Q1FY22

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Independent, performance-oriented digital marketing platforms can take on Google-Facebook duopoly through customisation

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Pandemic-fuelled cloud adoption to raise enterprise cloud spending at 28% CAGR to US$ 2.4tn by 2026, per Gartner

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Indian steel margins expected to remain elevated near term but revert to mean in longer run

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Renewable sector has several tailwinds. Intermittency will be handled by demand-side management, policy and ultimately storage

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Low insurance coverage, positive working-class demographics and Covid-19 tailwinds to spur growth for India’s life insurers

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Most auto segments saw modest MoM dispatches in July, barring tractors (-45% MoM); PV and 2W exports healthy

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Structural growth drivers such as shift to organised players, outsourcing/3PL and manufacturing scale-up are yet to materialise

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Rapid increase in India’s smartphone and internet penetration shaping new business opportunities backed by structural growth narrative

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Expect QoQ decline but robust YoY growth from our building materials coverage in Q1FY22 aided by lockdown-hit base quarter

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Weaker QoQ dispatches in PVs, CVs, 2Ws and 3Ws to impact topline; rising input cost pressure and supply issues to compound woes

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We expect robust Q1FY22 marked by QoQ dollar revenue growth of 1.5% to 11.4%; wage revision to impact operating margins

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Positive view on oil marketing companies with earnings supported by post-Covid recovery, potential BPCL divestment

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Most OEMs reported a sharp jump MOM. Tractors and PVs report normalcy in their dispatches led by lower dealer inventories

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We hosted a call with the IR team of Rusal, the world’s largest aluminium producer outside China with a global footprint across 20 countries

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Accenture (ACN) reported a stellar Q3FY21 performance and raised its full-year growth guidance

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RIL has announced a Rs 750bn foray into developing solar, storage and hydrogen technologies

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Renewables will continue to outgrow coal due to lower tariffs and a burgeoning role of ESG in investing and project finance

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Planned policy initiatives favour renewables and discom privatisation but state government’s action will decide if structural change can occur

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RBI has released a consultative document on the regulation of microfinance that seeks feedback from stakeholders by Jul’21

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Sector rally in June driven by expected recovery in power demand as Covid-19 restrictions ease but this is not sufficient for the rally to sustain

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Climate fears mounting due to global warming, shift in US stance and surge in ESG activism; coal, oil, auto, steel and cement to bear the brunt

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We interacted with Rajat Gupta, founder member of Tractor Junction – a leading digital marketplace for all major tractor brands in India.

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With most OEMs opting to partly shut down plants due to Covid-19, dispatches posted a steep sequential decline in May

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As per RBI data on lending and deposit rates, the WALR on fresh rupee loans sanctioned by SCBs inched up to 8.1% in April while that on outstanding loans was stable at 9.2%.

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We attended Sembcorp Industries' (SCI SP, Not Rated) Investor Day and spoke to the IR team of CLP Holdings (2 HK, Not Rated).

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9MFY21 home loan trends released by credit bureau CRIF High Mark point to mild deterioration in 90+ DPD by value.

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The Q4FY21 sequential growth and margin performance of India’s IT services sector has been in line with our as well as consensus’ optimistic estimates.

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We hosted Kowtham Raj VS, an active member of government think tank NITI Aayog who plays a key advisory role in India’s battery/solar manufacturing and hydrogen schemes.

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As per the Economic Times, the Forum of Regulators – a body comprising CERC and state regulators – has released a report making recommendations to reduce electricity tariffs for end users.

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India’s +5% p.a. power demand growth will be met by renewable capacity adds, which we expect will outpace coal by 2:1 in FY21-FY25, led by falling costs and rising green capital.

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Power stocks rallied yesterday, possibly on news of a 25% YoY uptick in electricity consumption in the first week of May.

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We hosted Stefan Louis, CEO of Nexcharge – a technology-based JV between Exide Industries and Leclanché of Switzerland – catering to lithium-ion tech in India.

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The RBI has opened a Rs 500bn on-tap liquidity window for banks at the repo rate till Mar'22, with a tenor of up to three years.

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PV sales in April are estimated to have fallen ~11% MoM, albeit bettering our projections.

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We hosted Kiran Koteshwar, ex-CFO of SpiceJet, for a perspective on the Indian aviation industry.

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We hosted a call with the management of Valin Steel (Valin), amongst the top 5 steel producers in China.

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The RBI has issued final guidelines to strengthen corporate governance and encourage professionalisation of management teams in banks.

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We hosted Robert Meyer, an expert on natural rubber (NR). According to Meyer, NR prices are headed for a structural rise amidst a global GDP recovery and short supply situation.

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Our logistics coverage has rebounded from the black swan Covid event of H1FY21.

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The SC has lifted its stay on tagging of NPAs but we expect slippages to be lower in Q4FY21 as banks have recognised a bulk of the Covid-related stress in their proforma numbers.

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Takeaways from our interactions with non-listed MFI players in the states of Assam and West Bengal for a ground-level perspective on the microfinance climate in these states.

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Key takeaways from our meeting with Arun Kumar, CEO of Kreate Energy, a top 3 player in the Indian power trading market.

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We expect our building material coverage to report robust YoY growth in Q4FY21 aided by a lockdown-hit base quarter and demand revival.

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We expect a mixed revenue performance from our auto universe in Q4FY21.

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Zomato’s latest pre-IPO funding round elevates its valuation to US$ 5.4bn vs. US$ 3.9bn in Dec’20, on the back of (1) recovery from the initial Covid-led volume slump, (2) improving unit economics, and (3) successful listing of US counterpart DoorDash.

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Key takeaways from our recent interaction with industry players for a perspective on economic activity revival and potential fallout from the renewed lockdown in Maharashtra.

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We expect a resilient Q4FY21 marked by healthy QoQ dollar revenue growth (2.5-5.3%) for most of our IT coverage, aided by modest cross-currency tailwinds (~60bps).

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PV sales continued their upward trajectory in Mar’21 with healthy growth (~2.3x YoY), off a soft base due to the lockdown announced in Mar’20.

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Key takeaways from our meeting with Sanjay Ladiwala, a renowned cement industry expert associated with the business since 1973.

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We interacted with the senior management of various banks for a perspective on the Supreme Court's verdict vacating the interim relief on NPA recognition and its directive on the 'interest on interest' issue.

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Accenture’s (ACN) Q2FY21 dollar revenue surpassed guidance by US$ 140mn, rising 8% YoY and 5.4% CC.

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With the acceleration in digital demand post Covid-19, reskilling has gained prominence for IT players.

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Pharma valuations have course corrected in last 6M/3M with BSE healthcare index underperforming Nifty by 20%/11% due to sector rotation amid receding Covid headwinds and reemergence of FDA risk while earnings were resilient.

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Prices of natural rubber and crude derivatives have skyrocketed 25% and 55% respectively since Oct’20.

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PV sales continued their upward trajectory in February with healthy YoY growth (+21%).

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Q3FY21 sequential revenue growth and margins for the IT services sector have been robust, surpassing our already-optimistic estimates.

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PV sales continued their upward trajectory in January with healthy YoY growth.

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Input costs make up 65-70% of revenues for most auto manufacturers.

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Given higher quarterly dispatches, we expect Q3FY21 revenues to expand for our auto universe.

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Q3FY21 is yet another quarter where management commentary will be watched even more keenly than reported earnings.

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Aggregate revenue of our logistics coverage universe is forecast to grow 11% YoY in Q3FY21 vs. a 1% uptick in Q2.

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Key takeaways from our interaction with an expert on the credit card industry.

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We expect a strong Q3 for LPC (flu, India recovery), SUNP (specialty) and DRRD (US launches) with QoQ growth in EBITDA and margins, partly aided by cost savings.

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We expect most of our building material coverage to clock YoY growth aided by demand revival.

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We hosted Amit Sharma, MD – Miraj Entertainment, on a call with select investors.

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Passenger vehicles continued their upward trajectory in December with healthy YoY and MoM growth.

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We expect Q3FY21 to be resilient with a healthy QoQ dollar growth (2-4%) for most of our IT coverage, helped by modest cross-currency tailwinds (~35bps).

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Key takeaways from our interaction with a power sector expert.

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We hosted Dr. Deepak Hedge, Chief Technology Officer, EOC Pharma – Shanghai, as part of Pharma expert series (Virtual) last week.

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Accenture's (ACN) Q1 dollar revenues beat the guided range by US$ 200mn, up 4% YoY and 2% CC.

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Most high frequency indicators maintained their upward trajectory in November.

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Auto sales continued their upward trajectory in November with healthy YoY growth propelled by festive demand.

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Natural gas consumption surged to 160.5mmscmd in October (+5% YoY, +12.6% MoM), boosted by the industrials segment.

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Most key deal wins and partnerships in Q3FY21 so far have been in the blockchain and digital transformation space.

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PSU stocks have had a most forgettable year in 2020 with the Nifty PSE index declining ~30% since Jan’20.

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After a sturdy Sep’20, most high frequency indicators continued on the path of recovery in October as well.

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India's petroleum product consumption jumped 15% MoM (+2% YoY) to 17.8mmt in October as fuels across segments exhibited resurgent growth in tandem with the Indian economy's emergence from the world's strictest lockdown.

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Q2FY21 has been a much-awaited recovery quarter for Indian IT, exhibiting a V-shaped rebound marked by growth and margin outperformance across the sector.

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Natural gas consumption declined to 142.6mmscmd (–8% YoY, –4% MoM) in September as lockdowns across states hampered demand.

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Auto sales continued their upward trajectory in October with healthy YoY growth, ahead of our estimates.

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The earnings outlook for oil marketing companies (OMC) remains buoyant as marketing margins are holding at elevated levels.

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During Q2FY21, most OEMs have built up dealer inventory on hopes of a strong revival in the upcoming festive season.

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We expect building material companies under our coverage to witness significant operational improvement QoQ given the gradual easing of Covid restrictions.

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We expect positive Q2 surprises from Cipla (led by gProventil, Remdesivir), ALPM (US, EU), Laurus and Alkem (better seasonality).

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Aggregate revenue of our logistics coverage universe is expected to decline by 5% YoY in Q2FY21, a marked improvement from the 25% drop in Q1, aided by a gradual easing of lockdown restrictions.

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Q2FY21 has been another volatile quarter for the energy sector, with oil and spot LNG prices recovering from multiyear lows but spreads staying muted for cyclicals.

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Q2FY21 is yet another quarter where clarity on asset quality will be keenly awaited amid pandemic uncertainty.

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The Cabinet Committee on Economic Affairs (CCEA) has approved 'Natural Gas Marketing Reforms', with an objective to discover market price of gas from new producing fields through a transparent and competitive process.

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Most high frequency indicators posted a strong YoY recovery in Sep’20.

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Natural gas consumption in August declined to 148.8mmscmd (-7.8% YoY, 3.4% MoM), as ensuing lockdowns across states hampered demand.

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We expect Q2FY21 to be the growth recovery quarter with most companies in our coverage universe showing low-mid single digit QoQ growth, barring few exceptions.

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The recent rally across mid- and small-caps is yet to bring about a reversal of the long-term bearish trends that began in Jan’18.

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Auto sales continued their upward trajectory, improving MoM in September.

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As per latest RBI data, the weighted average lending rate (WALR) on fresh rupee loans sanctioned by scheduled commercial banks (SCB) declined 18bps MoM to ~8.4% in August, driven by a ~30bps fall in rates at private banks.

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Accenture’s (ACN) Q4FY20 dollar revenue was in line with the guided range of US$ 10.6bn-11bn, posting a decline of 1.4% QoQ and 1% CC.

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We interacted with some multi-axle truck fleet owners.

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Lead logistics indicators continued to improve in August, slowing their pace of decline vs. July – major port cargo fell 10% YoY (vs. –13% in July), container rail volumes dipped 8% (vs. –13%), and e-way bills contracted 3% (vs. –7%) – while IR’s freight volume grew 4% YoY (vs. –5%).

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Natural gas consumption in July declined to 144mmscmd (–7% YoY, –16% MoM), as the reinstatement of Covid-19 lockdowns across states hampered demand.

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We spoke with Mirae AMC CEO Swarup Mohanty recently.

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Auto sales clocked an expectedly healthy recovery across segments in Aug’20, barring MHCVs and 3Ws.

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While BFSI vertical revenues of Indian IT players contracted in Q1FY21, we expect a swift recovery to pre-Covid growth levels through FY21 on the back of (1) receding supply challenges and (2) steady technology budgets at large US banks.

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After nearly six months of shutdown, movie halls in India were denied permission to reopen in September under the new Unlock 4.0 guidelines issued by the Ministry of Home Affairs (MHA) on 29 August.

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Media articles suggest growing consolidation in the e-pharmacy chain, i.e. Reliance-Netmeds and PharmEasy-Medlife.

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India’s multiplex industry is undergoing unprecedented hardships amid Covid-19 shutdowns.

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RBI today introduced development policies along with the monetary policy, laying out new guidelines on the restructuring of personal loans – this has historically been a source of slippages and, together with extension of the MSME restructuring scheme, makes for a ticking time bomb in our view.

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The central bank has provided a resolution framework that allows all banks, NBFCs and HFCs to cope with Covid-related stress, wherein all loans including personal (retail) loans can be restructured.

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Natural gas consumption in June increased to 171.2mmscmd (+6% YoY, +9% MoM).

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Despite recent setbacks, we expect the Indian tyre industry to grow at a 7% CAGR to ~Rs 720bn during FY20-FY23.

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Auto sales improved MoM in July but remained weaker than the year-ago period.

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The recent rally in broad market indices – reminiscent of a classic V-shaped recovery – has been restricted to select stocks.

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We expect MUTH and MGFL to register strong AUM growth of 19% and 30% YoY respectively in Q1FY21 as a secular credit crunch and run-up in gold prices act as tailwinds.

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Key industry indicators fell at a slower pace in June vs. April/May, implying that the worst of the pandemic may be behind us.

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Oil & Gas appears to be one of the few sectors to have seen faster normalisation in fundamentals by end-Q1FY21.

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Q1FY21 will be a non-event as consensus estimates and stock prices already bake in an abysmal quarter.

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We believe the true picture of banks’ asset quality in Q1FY21 will be masked by the loan moratorium as this will rein in slippages.

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We expect building material companies under our coverage to post an anaemic Q1FY21 as the Covid-19 lockdown has exacted a severe toll on business.

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We expect a good Q1 for Cipla (led by OTC switch, gProventil), Alkem (deferred India sales) and LPC (Levo ramp-up) – cost savings can further aid higher margins QoQ.

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During Q1FY21, PV sales nosedived ~80% YoY and 3W/2W volumes slumped ~70%.

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The Q2CY20 ISG Index reflects stalled deal activity (ACV down 4.7% YoY) and a drop in managed services deal sourcing due to Covid-19.

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As per latest RBI data, the weighted average lending rate (WALR) on fresh rupee loans sanctioned by public sector banks (PSB) declined 26bps MoM to ~8.2% in May, whereas that for scheduled commercial banks (SCB) remained unchanged at 8.5% as private players managed to improve fresh lending rates by 30bps to 9.2%.

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We expect a broad-based demand-led decline in revenue and margins for IT services players in Q1FY21 due to the Covid-19 impact.

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Natural gas consumption in May increased to 157mmscmd (+7% YoY, +21% MoM).

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Auto sales improved on a sequential basis in June but remained weak versus last year.

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In a move seen as US election year rhetoric, new H1B visas have been suspended till Dec’20.

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As the market adjusts to shifting expectations in a Covid-19 world, we maintain our negative stance on leveraged companies.

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Global 5G rollout is estimated to offer a mega US$ 10bn business opportunity for Indian IT players.

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After unprecedented declines in April, key trade indicators slumped yet again in May – major port traffic nosedived 23% YoY (–21% in Apr) and container rail volumes dropped 19% YoY (–14% in Apr).

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We recently hosted a call with Abhinash Verma, Director General of Indian Sugar Mills Association (ISMA).

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India’s petroleum product consumption surged 47% MoM (–21% YoY) to 14.6mmt in May’20 as fuels across segments exhibited resurgent growth in tandem with the Indian economy’s emergence from the world’s strictest lockdown.

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Automotive production and sales are expected to plummet to multi-year lows in FY21 as pressures arising from the Covid-19 crisis engulf both demand and supply channels.

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As per latest RBI data, banks' fresh lending rates declined 52bps MoM to 8.3% in Apr'20, registering the steepest ever fall since Oct'14.

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The SC in a recent hearing expressed concerns over banks charging interest on loans under moratorium but has sought the government's reply on the matter.

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Auto sales in May remained muted owing to lockdown restrictions across major parts of the country.

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RBI data on sectoral credit deployment indicates that growth in non-food credit remained sluggish at 7.3% in Apr’20.

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RBI today announced further measures aimed at easing financial stress

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As the coronavirus continues to spread, Gartner now expects worldwide IT spends to decline 8% in CY20 vs. growth of 5% forecast earlier.

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The Centre’s Rs 20tn stimulus package provides impetus to structural reform initiatives that will bear fruit over the long term, but offer little immediate respite.

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While concerns about the travel & transport vertical (<5% revenue share for tier-I India IT) are at the forefront, we believe retail – the second largest vertical with 14% share – will be the worst hit for India IT services.

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Trade barometers registered unprecedented declines in Apr’20 as manufacturing activity came to a standstill amid the national lockdown.

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As part of its Rs 20tn stimulus package, the Centre today unveiled ~Rs 6tn in liquidity-related support, primarily targeting MSMEs and NBFCs.

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As per latest RBI data, fresh lending yields continued to decline, with a 40bps MoM drop in Mar'20 to 8.8%.

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India’s petroleum product consumption plunged 46% YoY (–38% MoM) to 10mmt in Apr’20, as all fuels except LPG saw severe demand erosion.

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Natural gas consumption in Q4FY20 increased a mere 2.6% YoY to 150mmscmd as offtake inched up across sectors and power demand dropped – CGD (28.6mmscmd, +10% YoY), other industrials (50.6mmscmd, +8.2% YoY) and fertiliser (45.4mmscmd, +4% YoY).

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The Centre has hiked excise duties on petrol and diesel by Rs 10 and Rs 13 per litre respectively as it strives to balance the fiscal math, translating to an estimated windfall of ~Rs 2tn for the exchequer.

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The GCC today imposed anti-dumping duty on ceramic tile imports from India and China from 6 June 2020 for five years.

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Weak dispatches in Q4FY20 due to BS-IV inventory liquidation and the March lockdown saw aggregate FY20 volumes declining at record rates.

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Already reeling under a domestic consumption slowdown, the Indian logistics industry has now taken a severe blow from Covid-19-led trade disruptions.

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RBI has announced key relief measures for NBFCs today, viz. targeted long-term repo operations (TLTRO) 2.0, special refinance facilities for All India Financial Institutions (AIFIs), and a one-year extension for real estate loans.

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The RBI today announced the following additional liquidity measures to address near-term concerns amid the Covid-19 pandemic.

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The oil price crash has been a main feature of Q4FY20.

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We hosted a call with China Yongda Automobile Services (Yongda), one of the leading luxury car dealers in China with over 200 outlets catering to marquee brands such as BMW, Porsche, Mercedes Benz, Audi and JLR.

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Building material companies under our coverage are likely to post a dull Q4FY20 as tough market conditions have been further accentuated by the lockdown in end-March, thus taking a toll on volumes.

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We expect a modest fourth quarter for our banking coverage followed by a sharp credit slowdown in Q1FY21 as the lockdown impact unravels.

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We expect BAF, MUTH and MGFL to register strong AUM growth in Q4FY20 even as efficient opex and risk management keep profits buoyant.

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We expect the ongoing lockdown to severely hamper demand for building materials in H1FY21 with some revival only from H2.

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As per ISG, Q1CY20 managed services deals – a more relevant indicator for Indian IT services players – were on track for 9-10% YoY growth pre-Covid-19.

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We expect DRRD, LPC (Levo ramp-up + Losartan/HCTZ), and DIVI (leverage post FDA audit) to report a good quarter, with higher margins QoQ for LPC/DIVI (decline for DRRD on R&D cost increase).

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Mar’20 volume growth was weak for all automotive segments as the Covid-19 outbreak followed by plant shutdowns hit production and sales.

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Natural gas consumption in Feb'20 increased 10% YoY to 160mmscmd as offtake climbed across sectors (except power) – fertiliser (47mmscmd, +9% YoY), CGD (30.4mmscmd, +17% YoY), and other industrials (52.9mmscmd, +13.7% YoY).

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We recently interacted with a number of logistics companies – listed and unlisted – as well as industry experts.

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India’s banking sector is battling lashing headwinds ranging from anaemic credit demand to elevated bad debt and Covid-19 fears.

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Central banks globally are bracing for a worldwide economic shutdown which heightens the risk of a protracted downside in global markets.

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Asset management companies (AMC) are a play on the growing financialisation of savings in India.

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Recent market correction, driven by global turmoil, has put Nifty valuations (at 15.5x one-year forward) at an attractive level.

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The RBI and government of India have superseded Yes Bank's (YES) board and placed the bank under moratorium from 5 Mar 2020.

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Feb’20 volume growth remained negative for most key segments, barring tractors.

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Trade indicators exhibited mixed trends in Jan’20.

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Jan’20 volume trends were mixed across segments and players based on stock levels and differing timelines for BS-VI production ramp-up.

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Overall fund allocation for key infrastructure sectors has declined 4% YoY in Union Budget FY21 to Rs 5.5tn, with gross budgetary support at Rs 2.7tn (+10% YoY) – the latter includes Rs 1.6tn (+7% YoY) towards roads and railways.

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The coronavirus outbreak in China is expected to exact a heavy toll on the global travel, transport and hospitality (TTH) industry.

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The auto industry slump over the past five quarters has seen the Nifty Auto Index plunging ~40% over the 12 months to Sep’19.

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Trade indicators exhibited mixed trends in Dec’19.

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Logistics companies in our coverage are expected to report a tepid Q3 as domestic and EXIM trade headwinds continue unabated.

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Moderate execution due to prolonged monsoon and lack of order wards in the past year is expected to contain revenue growth at ~9% YoY for our infrastructure universe in Q3FY20.

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Q3FY20 is likely to be a soft quarter in terms of business momentum as systemic loan growth has remained lackluster.

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Building material companies under our coverage are expected to post a tepid Q3FY20 as market conditions remained challenging, thus taking a toll on volumes.

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Cyclical business fundamentals aggravated in Q3FY20 – Singapore GRMs crashed to US$ 1.63/bbl (-75% QoQ), and petrochemical cracks declined ~20% QoQ.

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DRRD, LPC, Sun & Alkem to report strong quarters both for US and India.

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The finance ministry’s Rs 102tn National Infrastructure Pipeline (NIP) for India over FY20-FY25 comes as a major boost for the sector.

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High frequency indicators for the logistics industry remained subdued in Nov’19, but have improved incrementally vis-à-vis the past few months.

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Our analysis of growth trends over the last 12 years indicates a risk of protracted near-term softness for India’s IT services industry in the runup to US presidential elections in Nov’20.

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We hosted Kaushik Deb – Research Fellow at KAPSARC (King Abdullah Petroleum Studies and Research Center), Riyadh, for investor meetings in Mumbai.

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Credit growth for the fortnight ended 8 November slipped to a two-year low of 8.1% YoY, as per RBI data.

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High frequency indicators, a harbinger of the logistics industry’s performance, worsened further in Oct’19, indicating a deepening slowdown.

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All the three OMCs – IOCL, BPCL and HPCL – reported Q2 FY20 earnings well below estimates, impacted by low GRMs (US$3.8-US$3/bbl), under- performing the benchmark Singapore (US$6.5/bbl).

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At analyst meetings hosted separately by INFO and HCLT, we noted evolving digital capabilities and growing digital contract sizes at both players.

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The government has eased fuel retailing norms, allowing non-oil companies to set up petrol pumps in India to increase investment and competition in the sector.

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We met senior officials of the Maharashtra State Co-Operative Sugar Factories Federation (MSCSFF) which has 190 co-operative sugar mills operating in the state as members.

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High frequency indicators, a harbinger of the logistics industry’s performance, worsened in Sep’19, marking the end of a sedate Q2FY20.

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Cyclical business fundamentals showed mixed trends in Q2FY20 – Singapore GRMs surged to US$ 6.5/bbl (+88% QoQ), while petrochemical cracks declined ~10% QoQ.

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RBI data shows that credit growth for the fortnight ended 27 September slipped to a three-year low of 8.8% YoY.

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Poor project execution due to the extended monsoons is expected to contain revenue growth at ~15% YoY for our infrastructure universe in Q2FY20.

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High frequency indicators (EXIM trade, rail freight and major port traffic), corroborated by industry checks, signal a feeble demand environment for logistics services.

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Building material companies under our coverage are expected to post a modest Q2FY20 as tough market conditions exact a toll on volumes.

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We expect Alkem and DRRD to report a good quarter with largely stable US sales QoQ.

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ISG's Q3 Index reflects an uptick in deal activity and a return to double-digit growth.

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Despite global trade, revenue growth for tier-I Indian IT services players has held steady for the last three quarters.

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We attended an analyst meet hosted by NHAI on Bharatmala Pariyojana phase-I (BMP).

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RBI data on sectoral credit deployment indicates that growth in non-food credit slowed to a 17-month low of 9.8% in Aug’19, hobbled by lower growth across segments.

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Gold loans being self-liquidating and well-collateralised, India’s top-2 gold finance NBFCs, MUTH and MGFL, have found favour with debt/liquid funds post the IL&FS crisis.

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The global transition to electric vehicles is a potent threat to oil demand growth over the long term, estimated to shrink oil consumption from road transportation at a ~0.5% CAGR over 2018-40.

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Accenture posted record bookings worth US$ 12.9bn in Q4FY19, including 16 US$ 100mn+ TCV deals, besides guiding for 5-8% YoY CC revenue growth for FY20.

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We spoke with V K Sharma – CGM (Land Acquisition) and Siba Narayan Nayak, CGM (Finance) of NHAI, for an update on land acquisition and order award targets for FY20.

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The corporate tax cut provides much needed cheer for banks under our coverage – we raise FY21-FY22 earnings by 2-14% and ROE estimates by 30-220bps, but believe the near-term impact is already in the price.

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RBI data shows that credit and deposit growth for the fortnight ended 13 September were both weak at 10% YoY.

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We upgrade FY20 earnings by 2-11% for midcap companies under our coverage post the recent corporate tax cut.

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Our industry interactions suggest that while the recent corporate tax sop will aid earnings of select logistics companies within our coverage, the benefits may not be proportional to the cut as large corporate clients likely negotiate for better pricing.

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The tax rate cut announced by the government will be earnings accretive by 6-15% for energy companies in our coverage universe.

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The corporate tax reduction announced last week will bump up standalone EPS by 2-13% for our infrastructure universe over FY20-FY22, with HGIEL benefiting the most.

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The corporate tax cut from 30% to 22% (including surcharge from 34.9% to 25.2%) effective FY20 could spur an 8-15% earnings upgrade for pharma MNCs (Not Rated) and Diagnostic players/hospitals (Not Rated), as well as a marginal 3-4% benefit for Divi’s Labs among our Indian pharma coverage.

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High frequency indicators for logistics remained dull in Aug’19. Cargo volume growth at major ports softened to 1.2% YoY as a weak EXIM trajectory (–10.6% YoY) took a toll.

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We hosted 23 corporates from the BFSI and midcap sectors for meetings with 50+ institutional clients at our conference in Mumbai on 13 September.

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RBI data on sectoral credit deployment indicates that non-food credit growth remained subdued at 11.4% YoY in Jul’19.

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Natural gas consumption in Jul'19 increased 4.8% YoY to 155.1mmscmd, as offtake increased across sectors (with the exception of power).

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In a mega move towards consolidation, the Finance Minister has announced the merger of 10 PSBs into 4 new entities, albeit with no definite timelines or swap ratios.

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India's finance ministry has imposed provisional anti-dumping duty (ADD) on CPVC resin/compounds imported from China and Korea for a period of six months starting 26 August.

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RBI data shows subdued 12% YoY credit growth for the fortnight ended 02 August and stable 10% deposit growth.

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High frequency indicators exhibited a mixed trend in Jul’19.

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RBI data on sectoral credit deployment for Jun’19 indicates that non-food lending increased at a subdued 11.1% YoY for the month.

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RBI data shows that credit growth for the fortnight ended 05 July...

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