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MOSL: Morning India (6/July/21): 1. India Strategy (Midcaps hit a home run!); 2. Consumer Preview 1QFY22; 3. Godrej Agrovet; 4. HDFC Bank; 5. Godrej Consumer Products

MOrning India (6/July/21):

Today’s top research theme

India Strategy: Midcaps hit a home run!; Several benchmarks being reset; risk-reward metric not lucrative

• The outperformance of midcap and smallcap indices have gone past their earlier benchmarks on multiple fronts - consecutive months of positive returns, 12-month rolling returns gap v/s the Nifty, relative valuations, and contribution to overall market capitalization.
• The NSE Midcap 100/NSE Smallcap 100 indices have generated consecutive positive monthly returns of 102%/67% in the last 13 months/8 months. This is the best such period of consecutive months of positive returns for the NSE Midcap 100. The Nifty Smallcap 100 has bettered this only once in the past.
• Despite these recent sharp gains, the NSE Midcap 100 and NSE Smallcap 100 indices have underperformed the Nifty since their previous peaks of Dec'17. The Nifty has gained 51% since Dec'17, while the NSE Midcap 100/NSE Smallcap 100 have returned 28%/6%.
• While the midcap/smallcap valuations are rich and no longer lucrative on the risk-reward metric, the gradual unlocking of the economy and improved demand backdrop still offer bottom-up opportunities. Consistent earnings delivery v/s expectations are critical for further outperformance in our view.

Piping hot news

Residential sales surge 18% YoY in first half of 2021, says JLL report

Over 45,000 residential units were sold in the top seven cities in India, in the first half of calendar year 2021, up 18% year-on-year, as per a report by JLL, an international property consultant. Sales surged 83% on year during the quarter ended June. Last year, a nationwide lockdown was imposed at the end of March which brought the activities in the real estate sector to a standstill. As a result, sales had then dropped around 61% sequentially. However, the impact of the second wave was less severe, with sales down 23% sequentially at 19,635 units. New launches almost doubled during the second quarter of 2021 compared to the previous quarter.