Debt Mutual Fund Strategy
Classification - Restricted
While India's GDP growth / Earnings estimates have been downgraded, any uptick in growth trajectory could support equity market performance...
Trend in BSE Sensex TTM PE for 14-year
40
35
30
Average PE: 21.7
25
20
15
10
5
12.75
0
17.04
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Oct-14
23.46
21.9
22.8
Apr-15
Oct-15
Apr-16
Oct-16
Apr-17
Oct-17
Apr-18
Oct-18
Apr-19
Oct-19
Apr-20
22.55
Oct-20
Apr-21
Oct-21
Apr-22
Oct-22
Sources Capitaline
Going forward, Incremental earnings growth momentum is likely to
see slowdown on back liquidity tightening
EPS (Rs)
S&P BSE Sensex Consensus EPS (Rs.)
4000
40.0
3456
34.4
35.0
3500
3092
30.0
3000
2675
2410
2500
1540
1793
2000
1472
1554
15.4
5.6
1500
1000
500
13.2
4.4
0
FY18
FY19
FY20
FY21
FY22
FY23E
Note: EPS is based on Full Market Capitalisation
25.0
20.0
15.6
15.0
11.8
11.0
:10.0
5.0
0.0
-5.0
-10.0
FY25E
FY24E
Source: Bloomberg,
% YoY Change in EPS
Nifty 50 Index
MSCI Emerging Market Index
103.93
70.86
Jan 14
Jan 31
Feb 14 Feb 28
Mar 15
Mar 31
For 15
Apr 29
May 16
May 31
Jun 15
Jun 30
Jul 15
329
Au 15
Aug 31
Sep 15
Sep 30
Oct 14
Oct 31
2002
Nifty-500: Corporate profit to GDP (%)
-2.7
FY03
5.1
4.6
3.7 3.8
4.0
3.3
FY04
FY05
FY06
FY07
Sharp recovery in earnings led to improvement in Corporate Profit
to GDP ratio in the recent past. With earnings growth expected to
4.6 4.6 continue, this ratio may see further improvement.
4.2
FY08
FY09
FY 10
4.3
3.9 3.8
3.47
3.3
3.2
2.9 2.8-2.8-
2.2
Average: 3.7%
FY 11
FY 12
FY 13
FY 14
FY 15
FY 16
FY 17
FY 18
FY 19
FY20
FY21
FY22
FY23
Source: ICICI Prudential Mutual Fund
India has outperformed the EMs substantially
since last 10 months, given the strong economic
growth outlook, despite the recent downgrades,
as the other key EMs have seen sharper
weakness. To maintain this outperformance, the
Indian earnings growth trajectory needs to start
shifting upwards.
S&P BSE Sensex is trading at 22.7x of
FY23E Bloomberg consensus EPS of
Rs.2675.
India's monetary policy tightening
continues its focus to ensure that inflation
returns to the target while supporting
growth. That, along with the weak global
outlook is likely to impart considerable
volatility to the market in the near to
medium term.
Our long term view on Indian markets
remain positive on the back of strong
monsoon, rise in capacity utilisation and
credit growth, government's capex push,
strong corporate and bank balance sheets
and buoyant consumer and business
confidence and superior demographics.
Hence, any sharp dips in markets could be
used as buying opportunities by investors
with a 2-3 year's investment horizon.
Investors could have larger focus at Large
Cap, Value and Hybrid Equity funds in line
with their risk profile and product
suitability.
20
Confidential/Restricted
HDFC BANK RESEARCH
Classification - Restricted
HDFC BANK
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