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MOSL: BULLS & BEARS (September 2021): India Valuations Handbook — Nifty closes at record high in Aug’21

BULLS & BEARS (September 2021): India Valuations Handbook — Nifty closes at record high in Aug’21; India outperforms global markets

 

Strategy: Nifty closes at record high in Aug’21; India outperforms global markets

• Nifty closes above 17k; adds 1k points in 19 trading days: The Nifty exceeded the 17,000 mark in Aug’21 to reach a record high, after remaining muted over the last two months. It ended 8.7% higher MoM in Aug’21 to close at 17,132. The rally was driven by positive Asian cues, strong inflows by FIIs/DIIs, and a good end to the 1QFY22 corporate earnings season. FII inflows returned to USD1b in Aug’21, after recording the highest outflows in July’21 since Mar’20 (-USD1.7b). DIIs saw inflows for six consecutive months to USD0.9b. The Nifty Midcap 100 (+2.2%, MoM) and Nifty Smallcap 100 (-2.5%, MoM) underperformed the markets in Aug’21. In the last 12 months, midcaps have risen 70% v/s a 50% rise for the Nifty. In P/E terms, the Nifty Midcap 100 is now trading at a 9% discount to the Nifty.
• Macro rebounds – best ever real GDP growth of 20.1% YoY in 1QFY22: Real GDP/GVA grew 20.1%/18.8% YoY in 1QFY22 (v/s our forecast and the Bloomberg consensus of 21%/19.6%). Growth in real GDP was largely attributable to 13.8% YoY growth in consumption and 56.7% YoY growth in Gross Capital Formation (GCF). Nominal GDP grew 31.7% YoY in 1QFY22, against a contraction of 22.3% YoY in 1QFY21.
• 1QFY22 Results Review - Strong start to FY22: Corporate earnings in the first quarter of FY22 have been in line with the elevated expectations, aided by the deflated base of 1QFY21 and localized and less stringent lockdowns v/s 1QFY21. Nifty sales have been in-line (50% YoY; est. 48%), while EBITDA/PBT/PAT growth has come in at 41%/103%/101% YoY (est. 38%/89%/94%). The MOFSL Universe has reported sales/EBITDA/PBT/PAT growth of 51%/50%/120%/117% YoY (est. 46%/46%/111%/114%).