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MOSL: INDIA STRATEGY - THE EAGLE EYE: The juggernaut continues; India leads world indices

INDIA STRATEGY - THE EAGLE EYE: The juggernaut continues; India leads world indices; Nifty outperforms Mid/Small-Cap first time in CY21

 

In this version of ‘The Eagle Eye’, we highlight (a) India’s relative outperformance in the month of Aug’21 , b) the rise of world equity market cap over the past 2 decades, c) Correlation between Bank Nifty underperformance with collapse in real yields, d) Big companies benefitting post pandemic through cost optimization and pricing power leading to higher margins and profitability versus the rest and e) 1QFY22 GDP growth rates and high frequency indicators suggesting  macro-economic recovery.

• Nifty crossed the peak of 17K in Aug’21 leading to India outperforming EM and global peers.
• Global equity markets have added 75% in market cap from Mar’20 lows to reach USD 119t.
• Bank Nifty has underperformed Nifty while closely tracking the fall in real yields.
• Big companies keep getting bigger as top 100 companies benefit from cost optimization and pricing power to increase EBITDA margins and profits
• 1QFY22 earnings season has largely been inline with expectation led by cyclicals companies.
• GDP– 1QFY22 Real/Nominal GDP grew by 20.1%/31.7% YoY aided by a soft base of 1QFY21. Investment and private consumption were sharp contributors to economic growth
• Macro Trends- Government gross receipts as % of BE at multi-year high while fiscal deficit is at multi-year lows. South west monsoon has been in deficit in the month July’21/Aug’21.
• Active COVID-19 cases declined below 387k in Aug’21, with the vaccination pace picking up to 6.1m per day in Aug v/s 4.3m in July’21.