The Indian markets have seen a good run in the last three months with the S&P BSE Sensex rising around 7 per cent and the Nifty50 moving up 7.5 per cent. The next leg of the market rally from here on, analysts suggest, will be driven by a growth in corporate earnings over the next few quarters. That said, they do not expect material / sharp downgrades to India Inc's earnings estimates despite headwinds for the economy.
'It may sound like sacrilege, but does it really matter if the global raters downgrade India for fiscal slippage?' asks Tamal Bandyopadhyay.
'Investors need to be stock specific and should not rush to buy stocks at the current levels.'
Speaking at industry association CII's annual session, PM Modi said the government has taken tough steps to fight the coronavirus pandemic and has also taken care of the economy. "On the one hand we have to safe the lives of our people and on the other hand we have to stabilise the economy and speed up the economy," he said. "Yes, we will definitely get our growth back," he asserted.
Global forecasting firm Oxford Economics on Monday revised downwards its India GDP growth forecast for 2021 to 10.2 per cent from 11.8 per cent previously, citing the country's escalating health burden, faltering vaccination rate and lack of a convincing government strategy to contain the pandemic. Oxford Economics also said that notwithstanding the likelihood of further mobility restrictions, it expects India's targeted lockdown approach, less stringent restrictions, and resilient consumer and business behaviour to mitigate the economic impact of the second wave.
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Some analysts believe that markets are expected to remain unclear and would have to wait until tomorrow's US non-farm payrolls data.
India was already in the midst of a protracted economic slowdown before the virus hit due to a festering crisis among shadow lenders and declining consumer demand and private investment. Service sector activity in India is still effectively on hold.
India's sovereign credit ratings do not reflect the economy's fundamentals, the Economic Survey said on Friday and nudged the global agencies to become more transparent and less subjective in their ratings. The Economic Survey 2020-21, tabled in Parliament, said that sovereign credit ratings methodology must be amended to reflect economies' ability and willingness to pay their debt obligations, and suggested that developing economies must come together to address this bias and subjectivity inherent in sovereign credit ratings methodology. "Never in the history of sovereign credit ratings has the fifth largest economy in the world been rated as the lowest rung of the investment-grade (BBB-/Baa3). While sovereign credit ratings do not reflect the Indian economy's fundamentals, noisy, opaque and biased credit ratings damage FPI flows," the survey said.
Debt management is going to be a worry for the Vedanta group until FY25 at least. However, the restructuring of business divisions in Vedanta India could lead to an unlocking of values. The group structure is fairly complex. Anil Agarwal-led Vedanta Resources (VRL), which is London-listed, has a lot of debt on the balance sheet. It will have to repay $1 billion in secured bonds by January 2024 and at least another $300 million in calendar 2024.
Growing concerns over slower-than-expected margin recovery, amid weak deposit growth have caught HDFC Bank's investors off guard. HDFC Bank's stock on Wednesday plunged nearly 9 per cent to hit an intraday low of Rs 1,527 on the BSE after reporting weaker-than-expected earnings in the third quarter (October - December) of the current financial year (Q3FY24). The shares of India's biggest private lender closed at Rs 1,536.9, down 8.46 per cent.
Analysts remain selective on cement stocks amid the likely government's capex push ahead of the scheduled general elections in May 2024. While UBS has initiated coverage on the Indian cement sector with an anti-consensus negative view and suggests investors sell select cement stocks on a rally, those at Nomura remain selectively bullish on the sector and prefer companies with large brownfield optionality and multi-region presence. In the near-term, UBS expects strong earnings of cement companies in the next two quarters to be driven by robust demand and margin tailwinds, but suggests any sharp uptick in stock prices could offer a good opportunity for booking profits in the related counters.
S&P in November ruled out an upgrade in the country's rating for some considerable period, citing India's low per capita GDP and relatively high fiscal deficit.
Shares of telecom services providers - Reliance Industries (parent of Reliance Jio), Bharti Airtel, and Vodafone Idea - have shed up to 23 per cent so far in the current calendar year as growth in the wireless subscriber segment begins to plateau amid higher tariffs and rising costs of smartphones. By comparison, the benchmark S&P BSE Sensex, and sectoral index BSE Telecom have dipped 1.8 per cent, and 12.6 per cent, respectively, ACE Equity data shows. However, analysts expect the trend to reverse soon as telecom services providers focus on the next leg of growth -- fixed broadband (FBB) segment.
'The slide in growth has arisen primarily because we have an NBFC crisis on top of a banking crisis,' points out T T Ram Mohan.
The government has promised to keep the deficit at 4.1%
State Bank of India's earnings growth may turn lacklustre in the near-term, warn analysts. This, they said, could be due to margin compression and likely lower fee income over the next one year. "While the cost of deposits is repricing sharply across the system, there will be relatively lower yield expansion going ahead as most of the back-book has been repriced and there is a high competitive pressure on yields.
India's top 10 banks, including the SBI, ICICI Bank and HDFC Bank suffered a collateral damage following the Standard and Poor's lowering the country's sovereign rating outlook.
Differing with the downgrade accorded by Moody's, leading ratings agency Standard & Poor's has upgraded the Indian banking sector saying its domestic regulations are in line with international standards.
So, what does 2016 have in store for the Indian markets? Will they be able to take a giant leap forward in the leap year, and what are the key risks?
The rupee had lost 48 paise to close at 55.42 against the Greenback in the last session.
Pakistan has been scrambling in recent months to avoid being added to a list of countries deemed non-compliant with anti-money laundering and terrorist financing regulations.
The official said the finance ministry will impress upon rating agencies the resolve of the government to contain fiscal deficit at 4.1 per cent this year and lower it to 3 per cent by 2016-17.
Fitch had last upgraded India's sovereign rating from BB+ to BBB- with a stable outlook on August 1, 2006.
A dossier will be given to the FATF, an international terror financing watchdog.
'The Indian economy is in slowdown and growth may stay slow,' notes Devangshu Datta.
The S&P BSE Midcap and the S&P BSE Smallcap indices gained 0.3% and 0.5%, respectively
While analysts remains overweight on financials, property, discretionary, industrials and materials, they maintain a neutral stance on pharma, telecom and energy; and underweight on staples, utilities, and IT services.
There is immense pressure on Biyani to go ahead with the RIL offer after FRL defaulted on its interest payments of Rs 100 crore on July 22.
The FATF continuing Pakistan in the 'Grey' list means its downgrading by IMF, World Bank, ADB, EU and also a reduction in risk rating by Moody's, S&P and Fitch.
The world's biggest lockdown that shut a majority of the factories and businesses, suspended flights, stopped trains and restricted movement of vehicles and people, may have cost the Indian economy Rs 7-8 lakh crore during the 21-day period, analysts and industry bodies said.
While foreign currency rating was retained at Baa2 -- the second-lowest investment grade score -- Moody's also projected a fiscal deficit of 3.7 per cent of gross domestic product in the year through March 2020, a breach of the government's target of 3.3 per cent.
A cut in rates would have encouraged the banks to lend aggressively on the retail front.
However, the Indian economy is expected to bounce back in 2021, the World Bank said.
'Earning expectations remain strong.'
Since its peak, the S&P BSE Sensex has dropped nearly 3,000 points.
An analysis of past 20 years' demand cycles done by Edelweiss Securities indicates that the auto sector is currently in the middle of a down cycle. Volume recovery, they say, is unlikely to be as sharp as in the past, unless there is strong fiscal support.
Though most analysts expect the global central banks to keep the liquidity tap open, valuations of Indian markets, they say, are beginning to look stretched. Against this backdrop, they remain cautious, with some even expecting a minor correction from here on.
'India is likely to do better than other emerging markets.'
With this, multilateral lenders like the International Monetary Fund, the World Bank and the European Union may continue downgrading Pakistan, making its financial situation more precarious.
There are various estimates of India's debt to GDP ratio, but the consensus is that that it would be over 80 per cent at the end of the current fiscal year.
