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MOSL: Morning India (3/April/20): 1. Bulls and Bears (Nifty wraps up worst year in a decade); 2. Coal India; 3. Aurobindo Pharma; 4. Bharat Electronics; 5. Auto (TVS wholesales); 6. Expert Speak (Healthcare); 7

Morning India (3/April/20):

Today’s top research theme
Bulls & Bears: Nifty wraps up worst year in a decade
** The Nifty could not have had a worse finish to FY20. As the Coronavirus (COVID-19) pandemic spread across the world, the Nifty nosedived 23% in Mar'20 to close at 8,598 (-26% YoY), the worst since Oct'08.

** Further, in FY20, mid-caps were down 36% as against the Nifty's decline of 26%. Notably, over the last 5 years, mid-caps have underperformed the benchmark by 11%. The intensity of the decline was severe with the Nifty correcting ~40% (at its panic bottom) in Mar'20.

** Metals (-50%), Autos (-43%), PSU Banks (-42%), Capital Goods (-41%) and Real Estate (-35%) were the biggest losers.

** Given the nature of the crisis and consequent containment measures, forecasting corporate earnings for FY21E has become difficult with existing earnings estimates facing sharp downside risks. In this scenario, it is prudent to look at trailing valuation metrics. The Nifty is trading at a trailing P/E of 16.2x, the lowest in 6 years while trailing P/B of 2.1x is at its lowest since the Global Financial Crisis (GFC). Market-cap to GDP is at 54%, again at a level seen during the GFC.

Piping hot news
Govt mulls a phased unwinding of the 21-day lockdown, general guidelines likely today
The Union government is looking at a phased unwinding of the 21-day lockdown that has shuttered businesses and brought life to a standstill and has sought suggestions from states to evolve a common approach to lift the curbs gradually. The decision to involve states to evolve a strategy to end the restrictions was articulated during Prime Minister Narendra Modi’s video conference with state chief ministers on Thursday. States were asked to set up task forces to make suggestions for a gradual lifting of lockdown in the meeting that lasted for around two-and-a-half hours. The Centre will issue a so-called standard operating protocol to states on Friday, providing rough guidelines on how to lift the restrictions.