Category: Economy, Markets and Macro Views

Most of us are inquisitive about the rationale behind our growth and P/E targets. We offer to explain the same taking historical EPS YoY growth of BSE Sensex from 1995 to 2008.

On the basis of valuation, growth targets are modest if you look at them from a historical perspective. (more…)

The Bombay High Court today gave its judgment on the RIL-RNRL dispute on KG gas and directed RIL to supply 28 mmscmd to RNRL for 17 years at a price of US$2.34/mmbtu. This is lower than the gas price realization of US$4.2/mmbtu as per our current estimates.

Following this decision, this E&P value could reduce to Rs544/share assuming that RIL begins its supply of 28mmscmd of gas FY11E onwards (which is clearly a worst-case scenario given ADAG’s non-readiness of power plants to intake gas). The FY11E EPS could decline to Rs151 in this case from our base case of Rs165. (more…)

India’s industrial production (IP) increased 1.4% YoY, well above the Bloomberg survey of -0.1% but slightly below our estimate of 2.0%. It is quite likely that revised data (due next month) will show the April IP growth at around 2.0%.

The March outcome was revised significantly to show a much smaller decline of 0.8% YoY, compared to the -2.3% announced previously. This means that along with other revised data, the recently announced GDP growth for FY3/09 could revised to be closer to 7.0% from 6.7%. (more…)

The obvious worries about the ongoing rally in equity markets is the heightened volatility across asset classes. However, the bigger concern could be the spike up in volatility in underlying fundamentals. Put another way, markets are only reflecting the increased volatility in economic and fundamental indicators. For the rally to sustain, we believe it is important that the volatility in macro variables subsides, which could happen if the government were to follow up with strong policy action.

The absolute realized volatility of the BSE Sensex is slightly below a 29-year high. (more…)

The release of 4QFY09 GDP data which pegged growth at 5.8% resulted in the government’s advance GDP estimates being revised from 7.1% to 6.7%. Given that data in the last few months was weak (contraction in industry and exports), a revision was on the cards but growth would have been weaker were it not for higher govt spending.

Key things to note are,
A slump in private consumption to 2.9% while public consumption was up 20% – the highest since the 1960’s – largely due to the pay commission. (more…)

What are the Indicators an Investor must be watching for before committing his funds after the recent rise in stocks ? Here are some important indicators that has the potential to change the direction of the Indian markets.

Will WPI inflation move into negative territory by May end/ early June on high base ? Whether food prices will continue to be higher on supply constraint ? Or whether monsoon will be adequate in terms of quantum, timing and (more…)