EUR 120.00 For Business Accounts Only

MOSL: Morning India (24/May/19): 1. India Politics (Unprecedented mandate to NDA); 2. Sun TV Network (Near-term growth headwinds persist); 3. Thermax; 4. Quess Corp

MOrning India (24/May/19): 1. India Politics (Unprecedented mandate to NDA); 2. Sun TV Network (Near-term growth headwinds persist); 3. Thermax; 4. Quess Corp

 

Today’s top research theme

India Politics: Unprecedented mandate to NDA

• The National Democratic Alliance (NDA) has won the 17th Lok Sabha elections with a thumping two thirds majority. While the final tally is yet to be released, the NDA is winning/leading in 348 out of the 542 seats, according to the Election Commission of India website. The Bharatiya Janata Party (BJP) has crossed the majority again with wins/leads in 303 seats, bettering its 2014 tally of 282 seats. The United Progressive Alliance (UPA) has garnered 91 seats, with the Congress winning/leading in 51 seats – marginally better than its lowest-ever tally of 44 seats in 2014. Others are winning/ahead in 103 seats.
• The NDA led by BJP powered its way toward the country’s biggest re-election win in decades. It is the first time since 1971 that an incumbent prime minister with majority is voted back with an even bigger majority.
• With politics behind, we expect the market’s focus to revert to fundamentals and corporate earnings. The ‘Modi 1.0’ regime saw corporate earnings growing at a sub-optimal rate, given the backdrop of structural and disruptive macro reforms. India’s corporate profit to GDP ratio has moderated from 5.5% in 2008 to 2.8% in 2018. However, now the corporate earnings cycle appears to be bottoming out, and with a revival in credit growth and asset quality of corporate banks, FY20 looks poised for the first year of healthy 15%+ earnings growth. We, however, do not see a room for significant re-rating for the markets, given the underlying fair valuations (19.5x FY20E Nifty EPS) and continued earnings downgrades.

Piping hot news

Reliance Capital exits mutual fund business

• Anil Ambani-controlled Reliance Capital is all set to exit the mutual fund business by selling its entire stake in Reliance Nippon Life Asset Management Ltd.(RNAM) to its foreign partner Nippon Life Insurance. “Reliance Capital Ltd. today [Thursday] announced it has signed binding definitive agreements with Nippon Life Insurance of Japan to exit its stake in Reliance Nippon Life Asset Management Ltd.,” said a statement by Reliance Capital.