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MOSL: Morning India (29/November/21): 1. India Strategy (A correction, finally!); 2. Reliance Industries; 3. Solara Active Pharma; 3. One 97 Communications; 4. Financials (RBI Announcement); 5. EcoScope

MOrning India (29/November/21): 1. India Strategy (A correction, finally!); 2. Reliance Industries; 3. Solara Active Pharma; 3. One 97 Communications; 4. Financials (RBI Announcement); 5. EcoScope

 

Today’s top research idea

India Strategy: A correction, finally!

• After touching a record high on 18th Oct'21, the Nifty has corrected 8%, led by global factors: Fed's taper announcement, rising bond yields, higher crude oil prices, and strengthening of the US Dollar Index. A big fundraise in the primary market also put some pressure on the secondary market. Sentiments were battered across global equity markets on 26th Nov'21 with the detection of a new COVID-19 variant - Omicron - in South Africa. This resulted in risk-off sentiment, with markets correcting by 2-3% globally, easing bond yields, and an 11% fall in Brent Crude prices. India's VIX rallied 25% to 20.8.
• Despite the pullback, India remains among the top performers in CY21, with the Nifty up 21% in CY21 YTD v/s a flattish performance of the MSCI EM Index. Corporate earnings in 2QFY22 were better than our expectations, despite sharp input cost inflation impacting several sectors. Earnings estimates for FY22/FY23 are stable and haven't seen any downward revision, strengthening our belief in the resumption of a new earnings cycle. Valuations, after the pullback, at 23.3x/19.5x FY22E/FY23E Nifty EPS are relatively reasonable now. India managed the second COVID wave in Apr-May'21 with local restrictions and without implementing any national lockdowns, unlike the first wave in early CY20.