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MOSL: Morning India (06/August/19): 1. Bulls & Bears (When it rains, it pours!); 2. GSK Consumer; 3. LIC Housing Finance; 4. AU Small Finance; 5. Indian Hotels; 6. SRF; 7. Torrent Power; 8. Tata Comm; 9. Indian

MOrning India (06/August/19): 1. Bulls & Bears (When it rains, it pours!); 2. GSK Consumer; 3. LIC Housing Finance; 4. AU Small Finance; 5. Indian Hotels; 6. SRF; 7. Torrent Power; 8. Tata Comm; 9. Indian Bank; 10. Godrej Agrovet

 

Today’s top research theme

Bulls & Bears: India Valuations Handbook - When it rains, it pours!; Markets drown further deep, FIIs flood out

• The Nifty skid 5.7% MoM in Jul'19 after a 1.1% decline in the previous month. Notably, foreign fund exodus (USD1.9b) was the highest since Oct'18 as the budget proposal on super-rich taxation and FPI surcharge marred sentiment. DII inflows, however, spiked to USD3b - the highest since Oct'18. While the 10-year G-Sec yields corrected to 6.3-6.4% on the back of the government's proposal to tap overseas markets for borrowing, it did not provide much respite to the markets.
• Mid-caps underperformed large-caps with a 9.8% decline in the month. On a 12-month basis, mid-cap returns (-16%) lagged the Nifty's returns (-2%). The Nifty Midcap100 P/E ratio has corrected from 25.6x in Aug'18 to 14x currently. Mid-cap premium to the Nifty (14% in Aug'18) has also turned into a discount of 23% in Jul'19.
• Autos (-14%), Metals (-13%), Cap. Goods (-12%) and Oil (-11%)were the key laggards in July. Technology (+1%) was the sole gainer in the month.
• We believe that the Nifty is still expensive at 18.8x FY20E earnings. We recently raised the weightage of Defensives in our model portfolio - reintroduced ITC with 300bp and added weights in Bharti Airtel (200bp), HDFC (100bp) and NTPC (100bp).

Piping hot news

Rupee suffers biggest fall in 6 years, slumps Rs 1.13

The Indian rupee declined the most in about six years, mirroring the yuan’s slide to record lows, as fresh concerns over souring trade relations between the US and China triggered a global sell-off in emerging-market currencies. Separately, New Delhi’s move to end Jammu and Kashmir’s special status through a decree raised concerns that domestic politics would weigh on the economy, exacerbating the currency’s decline.