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MOSL: INDIA STRATEGY-Chart-book – Eyeing markets through key charts

INDIA STRATEGY: Chart-book – Eyeing markets through key charts

Indian equity markets have corrected significantly over the last one month (Nifty down ~26% from its 52-week high of 12,362 to the lows of 16th Mar’20) in tandem with global equity markets due to headwinds from the Covid-19 outbreak across multiple countries. However, we note that such significant corrections have opened up equally significant investment opportunities in the past. In this report, we look at several important investment parameters across cycles in the last two decades (Market movements, Absolute market-cap behavior, Past corrections, Polarization, Multiple Valuation metrics) and highlight our preferred investment bets in different buckets.

While our bottom-up earnings forecast and compilation will be released in Apr’20 with 4QFY20 Strategy Preview, we are assuming a 10% cut in Nifty earnings estimates for FY21 for valuation analysis in this report. This is to factor in both global and local headwinds and disruptions owing to the outbreak of Covid-19. Global Cyclicals will see significant earnings downgrade given the sharp fall in commodity prices and expected moderation in global economic growth. Domestic economy facing sectors will also see downward revision in the earnings forecast due to restricted movements to prevent the outbreak of coronavirus.