August-08 Presentation by Mr Prashant Jain

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<ul><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 1/26</p><p>1</p><p>Equities are unique assets that investors feel more</p><p>comfortable buying at higher prices and selling at</p><p>lower prices</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 2/26</p><p>2</p><p>Net Inflows in Equity Mutual Funds andBSE Sensex</p><p>-20,000</p><p>0</p><p>20,000</p><p>40,000</p><p>60,000</p><p>80,000</p><p>100,000</p><p>120,000</p><p>2000 2001 2002 2003 2004 2005 2006 2007 2008</p><p>0</p><p>5000</p><p>10000</p><p>15000</p><p>20000</p><p>25000</p><p>Net Inflow s (Rs. In crs) - LHS BSE SENSEX - RHS</p><p>Source: www.amfiindia.com, www.bseindia.comEquity mutual funds include Equity, Balanced and ELSS Funds (AMFI Classification)CY2008 figures as on July 31, 2008</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 3/26</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 4/26</p><p>4</p><p>SENSEX vs GOLD(July 31, 1988 July 31, 2008)</p><p>Source: Bloomberg. Period July 31, 1988 July 31, 2008.Returns are compounded annualised. Gold returns refer to returns in INR.$/oz Dollars / Ounce</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 5/26</p><p>5</p><p>The Indian Growth Story</p><p>6.06.25.5Indonesia</p><p>4.15.05.0Korea</p><p>5.35.95.9Malaysia</p><p>6.07.97.9Singapore</p><p>4.66.06.8Hong Kong</p><p>7.89.09.4India10.011.411.1China</p><p>Regional Economies</p><p>0.91.72.4Japan</p><p>1.52.62.9EU</p><p>1.92.22.9US</p><p>Global Economies</p><p>2008E20072006</p><p>GDP Growth Rates Forecast (%)</p><p>India is now a trillion dollarIndia is now a trillion dollar</p><p>economy. Growing at 7economy. Growing at 7--9% p.a.9% p.a.</p><p>Source: CLSA Estimates</p><p>Size and growth make India a compelling asset.Size and growth make India a compelling asset.</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 6/26</p><p>6</p><p>India transitioning to a large economy</p><p>2 0 0 6 G D P</p><p>( U S $ b n )</p><p>5 y e a r</p><p>C A G R</p><p>2 0 1 1 G D P</p><p>( U S $ b n )</p><p>U S A 1 3 , 2 0 2 3 . 0 1 5 , 3 1 3</p><p>J a p a n 4 , 3 4 0 1 . 8 4 , 7 4 6</p><p>G e r m a n y 2 , 9 0 7 1 . 1 3 , 0 6 3</p><p>U K 2 , 3 4 5 2 . 5 2 , 6 4 7</p><p>F r a n c e 2 , 2 3 1 1 . 5 2 , 4 0 6I t a l y 1 , 8 4 5 0 . 7 1 , 9 0 7</p><p>C a n a d a 1 , 2 5 1 2 . 7 1 , 4 3 3</p><p>M e x i c o 8 3 9 2 . 8 9 6 3</p><p>B r a z i l 1 , 0 6 8 3 . 2 1 , 2 5 2</p><p>0C h i n a 2 , 6 6 8 1 0 . 0 4 , 3 0 1</p><p>I n d ia 9 0 6 7 . 8 1 , 3 1 8</p><p>India is fast catching up with the bigger economies of the world due to the higher</p><p>growth rates. The Indian economy will be one of the biggest among developed and</p><p>developing countries, nearing that of Canada in the coming years.</p><p>Source: Based on recent data from Bloomberg</p><p>(Estimates)</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 7/26</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 8/26</p><p>8</p><p>Economy Review</p><p> Stable Consumption demand Robust Investment demand</p><p> Real estate is facing large slowdown (actually very</p><p>positive for long term growth)</p><p> After a moderation in FY09, growth rates may</p><p>accelerate from FY10 onwards.</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 9/26</p><p>9</p><p>Indias vulnerability to oil</p><p>Higher Current</p><p>Account Deficit</p><p>Higher Fiscal</p><p>Deficit</p><p>High Interest</p><p>rates, Inflation</p><p>High Oil prices</p><p>Adverse effect</p><p>on Equities</p><p>Equity Markets are forward looking, hence most probably have bottomed out</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 10/26</p><p>10</p><p>Impact of oil</p><p> Indias vulnerability to oil has been a major concern, particularlyfor the FIIs Oil consumption ~7% of Indias GDP</p><p> World average ~5%, US 5%, China 7%</p><p> Oil Imports - 30% of Indias total imports in FY08 Gross Oil imports = $77bn in FY08 (net imports (E) - $58bn)</p><p> FY08 avg price = $85/bbl</p><p> At avg $110, FY09E oil imports to rise $20bn (2% of GDP)</p><p> Large subsidy bill FY08 Rs.770bn ($19bn)</p><p> FY09e Rs.2trillion ($50bn) @ $125, ($1/bbl = $600mn of subsidy)</p><p> Fuel &amp; Light - 14% weight in WPI</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 11/26</p><p>11</p><p>Oil Has it peaked?</p><p>Sharp correction in crude prices</p><p>Slowing global growth, stability in USD,suggest best of commodity prices are behind</p><p>Source: Bloomberg</p><p>As on August 15, 2008</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 12/26</p><p>12</p><p>World Oil consumption</p><p>Low savings &amp; lower growth rates should impact oil demand in US/Europe</p><p>(50% of consumption)</p><p>Source: BP Amoco</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 13/26</p><p>13</p><p>Oil on one side demand is slowing</p><p> Global oil demand is slowing down US of global oil demand, negative growth for past several months</p><p> OECD 60% of global demand, negative growth in recent past</p><p>US - Weekly Product Supplied (kb/d)</p><p>19,000</p><p>19,500</p><p>20,000</p><p>20,500</p><p>21,000</p><p>21,500</p><p>22,000</p><p>Jan Feb Mar April May June July</p><p>2007</p><p>2008US oil demand de-growth</p><p>avg 3% in past 2Q</p><p>Source: DoE, IEA, Broker estimates</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 14/26</p><p>14</p><p>Oil on the other, supply is growing</p><p> Demand-Supply mismatch is easing Non-OPEC supplies expected to grow by ~1.1mbd in each of 2008 &amp; 2009</p><p> OPEC oil production assumed steady at 2007 levels, however OPEC NGLprodn expected to rise ~1mbd</p><p>0</p><p>0.2</p><p>0.4</p><p>0.6</p><p>0.8</p><p>1</p><p>1.2</p><p>1.4</p><p>1.6</p><p>2007 2008e 2009e</p><p>Incremental supply</p><p>Demand growth</p><p>Incremental World Oil Supplies (mb/d)</p><p>Source: DoE, IEA</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 15/26 </p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 16/26</p><p>16</p><p>Institutional flows to equity markets</p><p>FII are possibly under-weight India</p><p>Movement of MSCI Emerging market</p><p>900</p><p>1000</p><p>1100</p><p>1200</p><p>1300</p><p>1400</p><p>1500</p><p>8/13/2007</p><p>9/3/2007</p><p>9/24/2007</p><p>10/15/2007</p><p>11/5/2007</p><p>11/26/2007</p><p>12/17/2007</p><p>1/7/2008</p><p>1/28/2008</p><p>2/18/2008</p><p>3/10/2008</p><p>3/31/2008</p><p>4/21/2008</p><p>5/12/2008</p><p>6/2/2008</p><p>6/23/2008</p><p>7/14/2008</p><p>8/4/2008</p><p>Index</p><p>poin</p><p>ts</p><p>Emerging marekts are down 20% in CY 2008</p><p>Some broad numbers</p><p>Holding on Dec-07 $360bn</p><p>(-) value drop (30%) $108bn</p><p>(-) 10% INR apprn $ 25bn</p><p>(-) actual sale $ 6bn</p><p>Current value (est) $221bn</p><p>FII exposure to India down 38% in CY-08</p><p>MSCI Emerging markets Index down</p><p>20% only</p><p>Source: Bloomberg, Internal Estimates</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 17/26 </p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 18/26</p><p>18</p><p>Results Update 1QFY09</p><p>Earnings surprise positivelyProfit growth for the Sensex companies at 16.7%, sales growth at 31.3%.Profits clouded by forex losses, unlikely to repeat if currency remains stable</p><p>Adjusting for the forex losses earnings grew at a robust 26% YoY.</p><p>Sensex - June-0 Growth %</p><p>Sales Turnover 31.3%EBITDA 21.4%Other Income -9.4%Interest 31.6%</p><p>Depreciation 17.9%Tax 1.4%Net Profit 17.5%Net Profit (incl. Fin Cos) 16.7%Net Profit (Adjusted for Forex) 25.6%</p><p>Source: Merrill Lynch</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 19/26</p><p>19</p><p>Sensex reverts to attractive P/Es</p><p>0</p><p>5,500</p><p>11,000</p><p>16,500</p><p>22,000</p><p>96 97 98 99 00 01 02 03 04 05 06 07 08</p><p>BSE</p><p>Sensex</p><p>30x 25x 20x</p><p>15x</p><p>12x</p><p>BSE Sensex one year forward P/E(x)</p><p>Source: CLSA Asia-Pac Markets</p><p>As on August 21, 2008</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 20/26</p><p>20</p><p>Outlook for Equities</p><p> Indias Growth Premium has fallen</p><p>Country Fwd P/E Fwd P/EJuly 08 Jan 08</p><p>USA 12.5x 13.6x</p><p>Japan 11.2x 13.8x</p><p>China 13.8x 21.5x</p><p>India 14.2x 20.4x</p><p>Source: CLSA Asia-Pac Markets</p><p> Markets are fairly valued; mid caps are under valued Room for some P/E expansion (particularly if interest rates fall) in addition</p><p>to EPS growth</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 21/26</p><p>21</p><p>Conclusion</p><p> Deep pessimism has given way to cautious optimism</p><p> Favourable developments FIIs Under- weight India</p><p> Decent cash balances of local Institutions</p><p> Poor supply of new stocks</p><p> Dividend Inflows ($10 bn) Ranbaxy Buyback $1.7bn</p><p> Risks/concerns</p><p> Further increase in Crude prices Populist measures/ government policy</p><p>Maintain stable outlook with positive bias.</p><p>Mid caps should outperform</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 22/26</p><p>22</p><p>Inflation &amp; Equities</p><p> Inflation measures rate of change. Even at current prices,</p><p>1year later, rate of change will be zero. Inflation should bemuch lower after 1 year</p><p>Equities are a hedge against inflation. Companies over</p><p>time pass on the cost increases, maintain real growth and</p><p>thus real returns</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 23/26</p><p>23</p><p>Finally, in the last 20 years,</p><p>weve seen .Wars, terrorism, droughts &amp; floodsAt least two major financial scandals</p><p>Assassination of 2 prime ministers</p><p>At least 3 recessionary periods</p><p>10 different governments and</p><p>Sept 11th , Pokharan blasts etc</p><p>Yet, GDP has grown nearly 15% p.a. and the Sensex by 19%p.a.</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 24/26</p><p>24</p><p>NO. YEAR END SENSEX ROLLING 1 YR ROLLING 5 YR ROLLING 10 YR ROLLING 15 YR</p><p>GROWTH GROWTH GROWTH GROWTH</p><p>0 Mar-79 100</p><p>1 Mar-80 129 29%</p><p>2 Mar-81 173 34%</p><p>3 Mar-82 218 26%</p><p>4 Mar-83 212 -3%</p><p>5 Mar-84 245 16% 20%</p><p>6 Mar-85 354 44% 22%</p><p>7 Mar-86 574 62% 27%</p><p>8 Mar-87 510 -11% 19%</p><p>9 Mar-88 398 -22% 13%10 Mar-89 714 79% 24% 22%</p><p>11 Mar-90 781 9% 17% 20%</p><p>12 Mar-91 1168 50% 15% 21%</p><p>13 Mar-92 4285 267% 53% 35%</p><p>14 Mar-93 2281 -47% 42% 27%</p><p>15 Mar-94 3779 66% 40% 31% 27%</p><p>16 Mar-95 3261 -14% 33% 25% 24%</p><p>17 Mar-96 3367 3% 24% 19% 22%</p><p>18 Mar-97 3361 0% -5% 21% 20%</p><p>19 Mar-98 3893 16% 11% 26% 21%</p><p>20 Mar-99 3740 -4% 0% 18% 20%</p><p>21 Mar-00 5001 34% 9% 20% 19%</p><p>22 Mar-01 3604 -28% 1% 12% 13%</p><p>23 Mar-02 3469 -4% 1% -2% 14%</p><p>24 Mar-03 3049 -12% -5% 3% 15%</p><p>25 Mar-04 5591 83% 8% 4% 15%</p><p>26 Mar-05 6493 16% 5% 7% 15%27 Mar-06 11279 74% 26% 13% 16%</p><p>28 Mar-07 13072 16% 30% 15% 8%</p><p>29 Mar-08 15644 20% 39% 15% 14%</p><p>28% 19% 18% 18%</p><p>10/29 3/25 1/20 0/15Probability of Loss</p><p>Average Return</p><p>Past performance of the SENSEX may or may not be sustained in future</p><p>*Returns for the 1 year period are absolute</p><p>**Returns for periods more than 1 year are shown on a compounded annualised basisNote:</p><p>The base year of the SENSSEX is 1978-79 and the base value is 100. Please visit www.bseindia.com for the SENSEX calculation methodology</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 25/26</p><p>25</p><p>Thank You</p></li><li><p>8/14/2019 August-08 Presentation by Mr Prashant Jain</p><p> 26/26</p></li></ul>

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