时间：2022-10-24 04:28:45
In 2012, Indian markets outperformed their global peers to deliver 26 per cent returns, quite unexpected at the beginning of the year. This is despite the virtual collapse of the manufacturing sector, reflected in the Index of Industrial Production growth of 1.1 per cent thus far in FY 2013, which has been the key factor behind India’s economic slowdown. However, the past few months have raised some hopes of a likely recovery in FY 2014. While the base itself will be favourable for growth, few other catalysts are emerging: monetary easing will lower cost of funds; renewed policy action will help kick-start several stalled projects and revive confidence for starting new projects; and a favourable currency will drive manufacturing exports.
After the strong rally in 2012, stock market valuations are back at long-term averages. Mean reversion, where things eventually move towards the mean or average, is our core theme for the next two years– FY 2014 and FY 2015. We see mean reversion across the board – government policy, macro economy, corporate earnings and stock markets. Let me elucidate.
Government policy: Consider the following – foreign direct investment (FDI) in retail permitted, banking amendments cleared, direct cash transfer initiated, fiscal deficit coming under control and monetary policy poised to support growth. Finally, it is business as usual once again on the policy front.
Macro economy: Domestic variables should revert towards the mean. For example, GDP to recover from decadal low of 5.2 per cent in FY 13 to 6.5 per cent and fiscal deficit back to mean of 4.9 per cent in FY 14 from 5.9 per cent per cent in FY 12. External sector variables, however, may settle at a new normal – current account deficit at 3-3.5 per cent and dollar at `53 to `55.
Corporate earnings: Expect FY 13-15 earnings growth to revert to the mean of 15 per cent (compared with eight per cent during FY 08-13), and select sectors and stocks should also recover from their worst.
Stock markets: Expect domestic institutional flows into equities to bounce back. If the market earnings was to grow at its long term average, expect the Sensex at a new high of 23,000 within the next 12 months.
Let me give you five key themes for 2013.
PSUs: Over the past 10 years, 2002-12, PSU stocks performed well in the initial period. However, they underperformed the benchmark in the second half, more so in the past three years. Our estimates suggest that over FY 13-15, there is likely to be some mean reversion. PSU valuation de-rating seems overdone. With earnings getting back on track, there are multiple re-rating triggers as well: government policy engine back on track, pressure on PSUs to increase dividend payouts, higher FII participation and disinvestment.
Public sector banks: Over the past two years, public sector banks have underperformed significantly, led by sharp increase in slippages/restructured assets and deterioration in operating performance. With the impending economic recovery and monetary easing in FY 14, we expect balance sheet stress to peak out in the first half of this year. Banks’ Statutory Liquidity Ratio portfolio is at a multi-year high, which is beneficial in a falling interest rate regime. Valuations have seen some recovery and public sector banks now trade near their long-period averages. Improvement in asset quality trend would be a key catalyst.
Automobiles: Macro headwinds, which impacted the performance of automobile companies over the past 12 to 18 months, are turning favourable, with initial signs of an economic recovery, likely monetary easing and increased policy actions by the government. Expected softening of commodity prices and favourable exchange rates would boost profitability. The improving macro scenario is coupled with company-specific triggers: depreciating Japanese yen should significantly improve Maruti’s profits, Mahindra & Mahindra could witness significant upgrades on turnaround of loss-making subsidiaries, and Hero MotoCorp stands to benefit from expiry of royalty payments post June 2015.
Metals: Despite a 30 to 40 per cent earnings growth, the market capitalisation of metal companies has fallen by 30 to 35 per cent over the last two to three years. Markets have de-rated metal stocks due to exponential growth in their capital work in progress and resultant increase in debt. As various projects start generating cash flows and capex intensity peaks over the next two years, net debt should start coming off.
Midcaps: Over 2008-12, the BSE Midcap Index has underperformed the BSE Sensex by 17 per cent. Empirical evidence suggests that divergence between the two indices increases during a downtrend and narrows during an upturn. The one-year forward P/E( price-to-earnings) ratio of the BSE Midcap Index is at a 20 per cent discount to the Sensex and 18 per cent below its historical average since FY 04. Earnings growth estimate for the BSE Midcap Index for FY 13/FY 14 at about 25 per cent is significantly higher than that for the BSE Sensex, a positive for midcap stocks.
The author is Chairman and Managing Director, Motilal Oswal Financial Services Ltd