Sector Updates

ER&D spending set for major growth .......................................................................................... 9 ER&D services expand beyond mechanical function..................................................... 10 Manufacturing segment drives spending in outsourcing ............................................ 12 Digital mix cannibalizing legacy ER&D spend .................................................................... 14 Growing intensity of ER&D outsourcing .............................................................................. 15 Indian ESPs to grow faster than GCCs................................................................................. 16 India emerging as a global ER&D service provider .......................................................... 17 Segment-wise India opportunity ....................................................................................... 18...

In April, Consumer Price Index (CPI) inflation eased to 3.2%, while Wholesale Price Index (WPI) inflation declined to 0.9%. This sharp sequential drop in WPI inflation was mainly driven by lower food & fuel prices.


Bank of America analysts believe that food prices will remain “in check,” while core inflation will climb due to higher gold prices. The brokerage forecasts that GDP growth will recover to 6.7%, compared to the 6.2% seen in Q3FY25.

In the long term, we prefer TVS Motors and Hero Motocorp in 2Ws; M&M (non-coverage) as a play in the PV/LCV/tractor segment, followed by Maruti in PVs. We also keep a close watch on Ashok Leyland and Eicher (VECV) in the CV space for potential volume growth.

Valuation & View

We interacted with cement dealers across regions in India to assess the demand and pricing scenario in Apr'25. Our discussions indicate that demand remained steady across most of the regions during the month. However, prices declined in certain markets due to extreme heatwaves affecting labor availability, which in turn weighed on demand. The ongoing marriage and...

As per our import parity prices calculation, FTA countries can supply material if domestic prices improve beyond Rs53,000/t, limiting price rise. The worsening of US-China trade relations has increased the risk of global demand and economic slowdown over the past month. Metal prices, a proxy for global economic activity, have been under pressure over the last few weeks, in addition to commodity-specific demand-supply issues. China being a major consumer of commodities, further weakness in the economy (which has already been soft over the last few years) can add to the ongoing...

LPG distributors are demanding a sharp increase in commission to Rs150/cyl, nearly double the current Rs73.08/cyl. With OMCs already estimated to face under-recoveries of ~Rs400bn in FY25 due to constrained pricing flexibility, any further increase in distributor marginsif not passed throughcould worsen the financial stress. Given the stretched valuations that the companies are trading at currently and expectations of a bounce back in crude prices to USD70-80/bbl in the near term amid inability to pass on increase in fuel cost to customers, we maintain our cautious view on OMCs. We downgrade rating on...