Equity – Outlook
Contents
Recent Volatility Global Environment Domestic Environment India Macro Market Outlook
Sectoral Outlook
Strategy Product Details
Recent Volatility - Global Environment
US Sub-prime Problem
Central bank stepped in with liquidity Problem to persist in housing market – evident from housing prices correction in US expected to spill over to Europe Riskier assets repricing to continue over the medium term Fed may continue to cut interest rate Liquidity to resume post stability Emerging markets rebound evident from the bounce back except Indian markets
Yen Carry Trade
Yen-dollar rate to be the key determinant of unwinding India not immune to unwinding Short term volatility imminent
Domestic Environment
Fundamentals
Strong domestic growth Predominantly domestic savings and investments driven economy Strengthening rupee to put pressure on exports De-coupled to US relatively to the EM pack
Technical’s
Markets rally this year would be stock specific unlike sectoral moves last year More liquidity getting attracted to India – medium term because of superior ROE‟s globally Petro-dollar and sovereign funds – new sources of money Strong domestic flows- insurance + mutual funds
Valuations
Sensex P/E at 17.8x FY2009E Seems expensive relative to other Emerging markets May remain expensive because of superior growth and earnings quality Market returns in the last 4 years predominantly because of EPS growth and partly because of P/E expansion
India‟s GDP Growth
8 7 6 5 4 3 2 1 0 1950s 1960s 1970s 1980s 1990-2002 2002-2007
Growth has changed orbit, led by higher exports and higher private consumption.
Structural changes in GDP composition
Services 100% 45.9 37 31.3 23.1 14.9 28.9 26.4 50% 25.2 20.6 41.2 50.5 56.2 27.6 Industry Agri & allied
75%
25% 33.5 0% 1970
37.8
1980
1990
2003
2014
India is largely becoming a services and manufacturing driven economy
Sensex Forecast
FY05 SENSEX Earnings SENSEX Tgt @ 12.5 SENSEX Tgt @ 15 SENSEX Tgt @ 17.5 SENSEX Tgt @ 20 449 5609 6731 7852 8974 8.0 12.5 17600 FY06 536 19.5% 6705 8046 9387 10728 8.0 12.5 17600 FY07 725 35.2% 9063 10875 12688 14500 8.0 12.5 17600 FY08E 850 17.2% 10625 12750 14875 17000 8.0 12.5 17600 FY09E 985 15.9% 12313 14775 17238 19700 8.0 12.5 17600 FY10E 1084 10.0% 13544 16253 18961 21670 8.0 12.5 17600
10 year benchmark bond yield
Earnings yield Current Index Level
Market Outlook
Fed to continue to cut interest rates Over the medium term, uncertainty on US growth and Indian Political situation to determine the direction driven by impetuous to manage inflation and prices of energy and soft commodities. Long term – Indian economy to grow faster than the world and hence de-couple and give superior returns Risks
US Slowdown and hence world equity shake-up – extended w/off by global financial giants. Indian Political uncertainty ahead of the elections. Indian economy to decouple but Indian market to decouple with a lag and after some tough period
Sectoral Outlook
Positive Domestic Investment/Infrastructure led sectors
Capital goods Power equipment Oil Exploration + Ancillary
Negative Exports led setcors
IT/ ITES Textiles Pharma
Global growth related
Shipping Metals Oil & gas
Domestic Consumption led sector
Telecom
Financials
Strategy
Concentration on domestic themes linked to consumption and investment/infrastructure spending. Look for bottom up stock picking. Exploit trading opportunities in negatively view sectors. Use of derivatives for hedging and yield enhancement purpose.
Objective:
Aims to achieve capital appreciation over a long period of time by investing in across sectors and market capitalisation
Strategy:
Monarque is and structured to provide higher returns by taking aggressive positions across sectors and market capitalisation.
Suitability
Suitable for „HIGH RISK HIGH RETURNS‟ appetite
Investment Horizon Portfolio Turnover
1-3 years
HIGH
SCHEME DETAILS
Minimum investment :- Indian and NRI Investors – Rs. 3crores Maximum Number of clients: 25 Maximum amount of corpus in the fund: 75cr
Fees Structure : - 3% p.a.* in the event of the client redeeming within one year he would be charged for the remaining year.
Brokerage:-0.15 paise plus other taxes only * of the average daily value of portfolio payable quarterly.
Religare Edge
Be a partner in the portfolio creation, review etc Professionally qualified and experienced fund manager Powerful research and analytics supported by a pool of highly skilled research analysts. Dedicated team of trained and skilled advisors Wide and varied platter of products service to choose from Customer focus approach Committed high service standards Ethical business practices
Service Standards
Dedicated Relationship manager Daily web updates on your portfolio Frequent interaction with your fund manager Exclusive customer service and back office support
Disclaimer
Investments in Marketable Securities are subject to Market Risk. The information contained in this report has been obtained from sources considered to be authentic and reliable. However, Religare is not responsible for any error or inaccuracy or for any losses suffered on account of information contained in this report. This report does not purport to be an offer for purchase and sale of Marketable Securities.
Risk Factors
Investments in securities are subject to market risks, which include price fluctuation risks. There is no assurance or guarantee that the objectives of any of the schemes will be achieved. The investments may not be suited to all categories of investors. The names of the scheme do not in any manner indicate their prospects or returns. The performance in the equity schemes may be adversely affected by the performance of individual companies, changes in the market place and industry specific and macro economic factors. The debt investments and other fixed income securities may be subject to interest rate risk, liquidity risk, credit risk and reinvestment risk. Liquidity in these investments may be affected by trading volumes, settlement periods and transfer procedures. Technology stocks and some of the investments in niche sectors run on the risk of volatility, high valuation, obsolescence and low liquidity. The scheme may use derivatives instruments like index futures, stock futures and options contracts, warrants, convertible securities, swap agreements or any other derivative instruments for the purpose of hedging and portfolio balancing, as permitted under the regulations and guidelines. The use of a derivative requires and understanding not only of underlying instruments but of the derivative itself. Derivatives require the maintenance of adequate controls to monitor the transactions entered into, the ability to assess the risk that a derivative adds to the portfolio and the ability to forecast price or interest rate movement correctly. Scheme using derivate/futures and options products (if any) are affected by risks different from those associated with stock and bonds. Such products and highly leverage instruments and their use requires a high degree of skill, diligence and expertise. Small price movements in the underlying security may have a large impact on the value of derivatives/futures and options. Some of risks relate to mis-pricing or improper valuation of derivatives/futures and options and inability to correlate the positions with underlying assets, rates and indices. Also the derivates/futures and options market is nascent in India. In the case of stock lending, risks relate to the default from counter parties with regard to security length and the corporate benefits accruing thereon, inadequacy of collateral and settlement risks. The portfolio manager is not responsible or liable for any loss resulting from the operations of the schemes. The performance of the schemes may be affected by changes in government policies, general levels of interest rates and risks associated with trading volumes liquidity and settlement systems in equity and debt markets. The scheme may invest in non-publicly offered debt securities and unlisted equities. The may expose the scheme to liquidity risks. Engaging in securities lending is subject to risks related to fluctuations in collateral value/settlement/liquidity/counter party. Consult your financial advisor before investing.
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