equity market review jan-11
TRANSCRIPT
-
8/4/2019 Equity Market Review Jan-11
1/23
Equity Markets Review
January 2011
-
8/4/2019 Equity Market Review Jan-11
2/23
Sensex Rolling ReturnsNO. YEAREND SENSEX ROLLING1
YR
GROWTH
ROLLING
5YR
GROWTH
ROLLING
10YR
GROWTH
ROLLING
15YR
GROWTH
0 Mar-79 100
1 Mar-80 129 29%
2 Mar-81 173 35%
3 Mar-82 218 26%
4 Mar-83 212 -3%
5 Mar-84 245 16% 20%
6 Mar-85 354 44% 22%
7 Mar-86 574 62% 27%
8 Mar-87 510 -11% 19%
9 Mar-88 398 -22% 13%
10 Mar-89 714 79% 24% 22%
11 Mar-90 781 9% 17% 20%
12 Mar-91 1168 50% 15% 21%
13 Mar-92 4285 267% 53% 35%
14 Mar-93 2281 -47% 42% 27%
15 Mar-94 3779 66% 40% 31% 27%
16 Mar-95 3261 -14% 33% 25% 24%
17 Mar-96 3367 3% 24% 19% 22%
18 Mar-97 3361 0% -5% 21% 20%
19 Mar-98 3893 16% 11% 26% 21%
20 Mar-99 3740 -4% 0% 18% 20%
21 Mar-00 5001 34% 9% 20% 19%
22 Mar-01 3604 -28% 1% 12% 13%
23 Mar-02 3469 -4% 1% -2% 14%
24 Mar-03 3049 -12% -5% 3% 15%
25 Mar-04 5591 83% 8% 4% 15%
26 Mar-05 6493 16% 5% 7% 15%27 Mar-06 11280 74% 26% 13% 16%
28 Mar-07 13072 16% 30% 15% 8%
29 Mar-08 15644 20% 39% 15% 14%
30 Mar-09 9709 -38% 12% 10% 6%
31 Mar-10 17528 81% 22% 13% 12%
32 Mar-11* 19150 9% 11% 18% 12%
11/33 3/28 1/23 0/18Probabilityof loss
Past Performance of the SENSEX may or may not be sustained in the future. * Assume Index at same level for Mar-11 for illustrativepurpose* Returns for the 1 year period are shown on absolute basis
** Returns for periods more than 1 year period are shown on a compounded annualised basis Note: The base year of SENSEX is 1978-79 and the base value is 100.Please visit www.bseindia.com for the SENSEX calculation methodology
-
8/4/2019 Equity Market Review Jan-11
3/23
Indian Economy: In a Secular
growth phaseDecadal GDP growth continues to accelerate and is likely to move to 10% p.a.over next fewyears.
Source: Anand Rathi, decadal growth is for decade endingSource: Anand Rathi, decadal growth is for decade ending
3.83.5
4.14.4
5.7
7.2
2
3
4
5
6
7
8
1951-60 1961-70 1971-80 1981-90 1991-2000 2001-10
(Growth,YoY,%
)
GDP growth
-
8/4/2019 Equity Market Review Jan-11
4/23
Indian Economy: Positive LongTerm outlook
Consumption growth continues to be strong
Strong traction in infrastructure spending - Roads/Power to see largeinvestments
Roads: $ 30bn worth projects to be awarded over next 2 years.(~ $ 9bn of road projects were awarded over last 2 years & $ 27bnover last 5 years)
Power: 40,000 MW of capacity to be commissioned by FY2012 on abase of 160,000 MW, which entails an investment of ~ $35bn
Capacity utilization in manufacturing is running at near peak levels.This will necessitate increase in Industrial capex.
With steady consumption growth & accelerating infrastructure spend/increase in industrial capex, Indias GDP growth is expected to movetowards 10% p.a over next few yearsSource: Estimates and GOI data
-
8/4/2019 Equity Market Review Jan-11
5/23
Indian Economy: Low penetration ofconsumer goods
Decent room for growth in mobiles itself most common durable; otherdurables like cars etc have larger room for growth
Mobile Telephone Subscriptions Per 1000 Perso
386
532
674
876 894929 947 963
12551336
0
200
400
600
800
1000
1200
1400
1600
India
China
World
Brazil
Japan
USA
SouthAfrica
France
UK
Germany
Passenger Cars in Use Per 1000 P
25 37
96 105 105
318
430
495 496 502
0
100
200
300
400
500
600
India
China
SouthAfrica
Brazil
World
Japan
USA
UK
France
Germany
Source: BAML & Euro monitor -Data pertains to CY 09
-
8/4/2019 Equity Market Review Jan-11
6/23
Indian Economy: AcceleratingSaving rates
Rising savings rate to support faster GDP growth - % share of working
population will increase for next 3 decades.
-
8/4/2019 Equity Market Review Jan-11
7/23
Indian Economy: Near termchallenges
-
8/4/2019 Equity Market Review Jan-11
8/23
Equity Markets: A Review
Sensex near 20,000 after almost 3 years.
However, this time 20,000 index is fundamentally different. P/Es have moderated from 23x to 15x .
There are no material excesses in the markets unlike in 2007. Markets are valuing quality at a premium both in primary & secondary
markets, unlike in 2007
Rising Oil & commodities prices, persistent high inflation, increasing
interest rates & high inflation are pressure point for the economy.
Large supply of paper in Jan- Mar 2011 (~30,000crs)
Sail 8000crs
ONGC 10000crs
JSPL 7200crs
Tisco 3700crs
-
8/4/2019 Equity Market Review Jan-11
9/23
Equity Markets: Valuations nearLT averagesBSE- 30 Index & 1- year Rolling forward P/E
Source: CLSA
By Jan-12, Sensex P/E at 19,000 level will nearly be 14x
7.00
12.00
17.00
22.00
27.00
32.00
Jan-
00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
Jan-
10
Jan-
11
2,000
4,0006,0008,00010,00012,00014,00016,000
18,00020,00022,000Sensex (RHS) Fwd P /
-
8/4/2019 Equity Market Review Jan-11
10/23
Equity Markets: Outlook
Earnings growth outlook is decent despite stress on macroeconomic indicators
Sensex at 19100 trades at 16x P/E on Mar-12 estimates. These isslightly lower than long-term averages.
Returns over medium term should be in line with earnings growthrate i.e., 15-20% CAGR; returns of Large caps/ mid caps should notdisplay large divergence.
Spike in Oil prices is a key risk; reduction in fiscal deficit needs tobe monitored closely
Risk reward is favourable over medium to long term; allocation toequities should be increased in phases over 3-6 months
-
8/4/2019 Equity Market Review Jan-11
11/23
Investment Strategy: Assetallocation is key
Key to investing is right asset allocation i.e. how much in equities ratherthan when (timing) and where (stock selection)
Safe capital should be invested in Short Term Bond Funds / GILT Funds
Gap between bond and equity returns over medium to long term is likelyto be reasonable
Investors should consider increasing exposure to equitiesEven a 6% p.a. higher return* when compounded over long term, makes
a
significant difference to returns* and wealth creation.
-
8/4/2019 Equity Market Review Jan-11
12/23
Equity Mutual Funds are one of the best
ways to invest in Stock Markets.
ADVANTAGES OF EQUITY MUTUALFUNDS
1.Well Researched Portfolios
2.Professional Management
3.Advantages of IPOs/ Placement and big deals
4.You can invest in Small amount
5.Low cost
-
8/4/2019 Equity Market Review Jan-11
13/23
Real(i)ty Indian Real Estate, back ontrack
-
8/4/2019 Equity Market Review Jan-11
14/23
Real Estate Emerging steadily from the slump
The REAL ESTATE journey
Glory Despair Recovery
2006 - 07 2007 - 08 2008 - 09 2009 - 10
High liquidity atlow rates
Highest levels
of land buyingrecorded
Rise inmortgage rates
Rise in prices
due to oversupply
Depresseddemand, lowsales
Lack of trustabout pricingand delivery ofprojects
Enough signs of easing
liquidity Increase in off take with
stability appearing in prices
After a course correction, Back on track
-
8/4/2019 Equity Market Review Jan-11
15/23
Real Estate growth expected at a CAGR of 26% till 2014
44
55.4
69.9
88
110.9
139.7
0
30
60
90
120
150
2009 2010 2011 2012 2013
Estimated Real estate market size 2009 - 2014
15
15
17
10
10
17
18
25
26
23
26
25
23
22
2420
25
20
20
19
0% 20% 40% 60% 80% 100%
Office
Retail
Residenital
Hospitality
1
2
3
4
5
6,90,000 room nights
7.5 million units
43 million sq. feet
196 million sq. feet
Sector wise demand projections 2009 -2013
Currently property prices present a great opportunity to investors. A peak is expected
in the next 3 -5 years making real estate an attractive investment opinion.
The residential segment will lead the sectors recovery:
New players are expected to enter the market with properties designed keeping in
mind current economic condition and consumer preferences
Focus of real estate developers is the affordable housing segment which makes
up 50% of the total market currently.
US
Db
illion
CAGR
:26%
-
8/4/2019 Equity Market Review Jan-11
16/23
The best time to invest in this asset class
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
Jan-
09
Feb-
09
Mar-
09
Apr-
09
M
ay-
09
Jun-
09
Jul-
09
A
ug-
09
S
ep-
09
Oct-
09
N
ov-
09
Indian Real Estate Index - 2009 Evident signs of increasing investment
activity in the real estate sector USD 15 billion, the sum raised by real estate
firms in the past six months through QIPs
FDI Inflow
(USD million)
2006 -07 2007 - 08 2008 - 09 2009 10(E) Cumulative
(2006 2009)
Housing and realestate
467 2179 2801 1181 6628
India tops the BRIC nations Real Estate Transparency Index says Jones Lang LaSalle as per their2008 report. Investors looking at India as a long term investment destination can be confident
-
8/4/2019 Equity Market Review Jan-11
17/23
Residential realty The juicy bit
-
8/4/2019 Equity Market Review Jan-11
18/23
Residential realty demand peggedat 7.5 million homes by 2013
Demand for residential realty toreach 7.5 million units by 2013*.
Highest Cumulative demand willbe seen by Mumbai (1.6 million
units). Bangalore and Hyderabad
to witness highest CAGR at 14%. Urbanization, development of city
suburbs, increasing nuclear
families and rising income levels
to be the key demand drivers.
Prize rationalization, reduced
costs of borrowing, governmentsops etc. and, increasing focus on
affordable housing all
contribution to renewed demand.
Most developers are increasing
their portfolio to include
affordable housing.
120000
135000
150000
165000
180000
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
2009 (E) 2010 (E) 2011 (E) 2012 (E) 2013 (E)
Residential Real Estate Demand in units(2009 13)
Un
its
-
8/4/2019 Equity Market Review Jan-11
19/23
3 Factors that SAVVY
Real Estate Investorconsider before they
by any property
-
8/4/2019 Equity Market Review Jan-11
20/23
1. LOCATION
2. LOCATION
3. LOCATION
-
8/4/2019 Equity Market Review Jan-11
21/23
Apart from location factors that you shouldconsider before buying Real Estate
1. Future Infrastructure Development
2. Employment potential of the city
3. Reputation of the developer4. Site Plan / Apartment Plan
5. Your cash position and budget
6. Advantage of leverage
-
8/4/2019 Equity Market Review Jan-11
22/23
RISKS
1. Property prices India as compared to percapita GDP are highest in the world.
2. Interest rates are high and it affects thebuying power of the buyers.
3. The financial position of most of thedevelopers is not very good.
4. Rapid Infrastructure Development
-
8/4/2019 Equity Market Review Jan-11
23/23
Thank you