We are pleased to present to you our monthly market commentary and outlook for the forthcoming month. The ‘StockAxis’ Market Intelligence’ is a quick update on the markets for the month gone by and our view for the next month. Use our sharp and crisp synopsis to continue building your wealth!
- China’s steel output declined in August (after hitting a record high in July 2018) due to restrictions imposed on steel makers in an effort to tackle pollution.
- India has emerged as the country with hardest working employees with 69% employees claiming they would work 5 days a week even if offered a shorter working week.
- According to the Asian Development Bank, India’s share of GDP in the Asia Pacific region has risen from 14.6% in 2000 to 17.3% in 2018.
- World Bank endorses an ambitious 5-year framework to help transition India into a high-middle income country. The country expected to receive USD 25-30 bln in financial support as a result.
- Public companies in India no longer need approval to pay salaries to managerial staff beyond 11% of net profit of the company, according to Ministry of Corporate Affairs.
- India’s manufacturing for April-July 2018 increased as indicated by IIP growth pegged at 5.4%.
- E-commerce companies are now required to collect Tax Collected at Source (TCS) up to 1% while making payment to suppliers under Goods and Services tax (TAX).
- Digital commerce industry expected to reach 2.37 lakh crore by December 2018, according to ays Digital Commerce Report 2017.
- According to EXIM Bank, Merchandise and Non-Oil exports are expected to grow over 12% in the second quarter of FY19.
- India’s exports are higher by 19.21% to USD 27.84 bln in August 2018 as trade deficit falls to USD 17.4 bln.
- Wealthy Indians with assets exceeding USD 500 mln will grow by 70% by 2022, according to a report by Knight Frank.
- ‘Make in India’ shines in the Automobile industry; Indian-made auto parts find their way to Africa, Latin America, Asia, Middle East, Europe and Japan.
- India’s urban centres are expected to see real estate activity touch 8.2 bln sq. ft. by 2025 as GST stabilises cost of raw materials and streamlines complicated multiple tax structures.
- RecruiteX, a monthly report on hiring, indicates jobs grew by 33% YoY with the highest demand from the consumer durables industry.
- Insurance Industry got a boost by government’s Ayushman Bharat scheme and is expected to reach US$ 280 bln by FY 2020.
- NASSCOM and PwC predict that India’s e-commerce market will grow three times to pass US$ 100 bln mark by 2022.
- Indian consumers will pay 5-8% more for FMCG products like toothpaste, soap etc. as companies are set to increase minimum support price (MSP) amid record fuel hike.
- Compliance burden will ease for businesses as Finance Ministry eases GST refund process.
- Net investment by Domestic Institutional Investors (DIIs) in September 2018 was Rs. 12,504.04 crore against net investment of Rs. 2,822.72 crore in the previous month.
- India’s inflation eased to 3.69% in August 2018 against 4.17% in July 2018.
- The Indian Rupee depreciated vis-à-vis the dollar ending September at INR 72.5121 against INR 70.87 in the previous month.
- EY’s private equity report states that Private Equity and Venture Capital investments to the tune of USD 1.6 bln were received in India. Sentiment towards India remains strong.
- Securities and Exchange Board of India (SEBI) calls for enhancement of governance standards for issuers, intermediaries and infrastructure providers leading to bigger, cleaner and safer markets.
- SEBI explores allowing Non-Resident Indians to be included in the foreign portfolio investors category after compliance with Know-Your-Customers (KYC) norms.
- Government to meet disinvestment target for the year by initiating buyback in 13 Public Sector Units including Coal India, Hindustan Aeronautics, National Aluminium Company and others.
- SEBI reduces the listing timeline for initial public offerings to T+3 instead of the present T+6 reducing the waiting time for companies to get listed after closure of the issue.
- FIIs recorded a net outflow in Indian equities of Rs. 9,468.68 crore in September 2018 against Rs. -2,228.53 crore in August 2018.
- The Nifty closed at 10930.45 as on 28th September 2018 against 11,680.50 as on 31st August 2018, having fallen 750.05 points over the previous month.
- The Nifty 50 P/E ratio was at 26.44 at end-September 2018. The average P/E ratio for the past 12 months is 26.60.
- The Good: Earnings growth, rural recovery, NPA resolution
- The Bad: Crude prices, inflation, weakening currency, interest rates
StockAxis’ Outlook for October 2018
While the trade war between USA and China escalates, China has agreed to open its pharma sector by giving quick approvals to drugs manufactured in India.
India exported drugs worth $17.3 billion in the fiscal year 2017-18 to the US and the European Union. Only 1% of India’s exports go to China, the world’s second-largest market for pharmaceuticals. China is already supposed to have issued instructions that EU-approved Indian suppliers should be granted the industrial drug license promptly, so they can enter the Chinese market without many delays. China recently exempted 28 drugs, including all cancer medicines, from import tariffs which would benefit the Indian pharmaceutical industry.
Quick approvals in China, the world's second-largest drug market after the USA, would allow Indian companies to boost revenue at a time when pricing scrutiny and regulatory troubles have been hurting US sales. With China now being more receptive towards Indian manufactured pharma products, the challenge is now on Indian pharma companies to make prices competitive and penetrate the Chinese markets.
With China becoming increasingly strict on environmental clearances, higher raw material costs will immediately pose margin challenges for Indian agro-chemical manufacturers. To reduce dependency on China, Indian crop protection companies are actively scouting out for newer vendors.
While the industry is consolidating, excess inventory of finished goods in the system is finding demand, which, in turn, is reducing stocks thus making space for new supply. This will be further boosted by resumption in sowing and normal rainfall. Strong product pipeline and an expected recovery in Contract research and manufacturing services (CRAMS) will also contribute to recovery of Indian crop protection market.
FMCG – Rural
Out of India’s 1.35bn people, 65% reside in rural areas. However, their consumption is less than half that compared to cities. Rural consumption growth has been tepid over the past 5 years compared to the fast rates seen in 2007-12. However, with the government’s increased emphasis on boosting incomes in the countryside, and following 2 years of healthy monsoons, rural spending is expected to double over the next 5 years and contribute more meaningfully to the country’s economy. Already rural consumers are spending more on snacks and hair products, while increased access to the internet is boosting demand for aspirational goods.
NBFCs have capitalized on the retail boom, government’s thrust on housing and rural sector, and NPA stress that PSU banks are going through. Several have profiled themselves as front runners in specific segments while others have entered into several segments broadening their lending profile.
The recent duress with respect to IL&FS, primarily due to technical reasons, has thrown up attractive opportunities in the NBFC space. Fear psychosis has led to most NBFCs losing anywhere between 15% to over 50% of their values within a fortnight. With nothing changing structurally, this severe drop has led to cherry picking opportunities to accumulate top quality businesses with high visibility run by proven managements.
StockAxis sectoral outlook
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